"Family Loan Agreement Template"

Family Loan Agreement: What Is it?

A Family Loan Agreement refers to a detailed contract signed by the lender and the borrower that are related by marriage or blood and want to record the amount of money one of the relatives gives to the other and the terms of repayment.

Alternate Name:

  • Friends and Family Loan Agreement.

Usually interest-free, this kind of personal loan may be the perfect solution for individuals that cannot file a loan application with a financial institution to get the money they need or whose application was rejected. Whether you are planning to make a down payment on your house or you are struggling with your day-to-day expenses, a loan from a family member can help you handle financial difficulties with minimal loss.

You may find a Family Loan Agreement template through the link below.

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How to Write a Loan Agreement Between Family Members?

Even though it may be tempting to have a verbal Loan Agreement Between Family Members considering you and your relative have known each other for many years and there is mutual trust, there is always a risk of non-payment which may ruin the relationship between you and other family members that might take sides in a personal conflict. This is why it is important to compose a contract keeping everyone on the same page and demonstrating the intention of the borrower to give the funds back.

Here is how you should prepare a simple Family Loan Agreement:

  1. Identify the counterparts by their full names and addresses.
  2. Explain the objective of the agreement - the lender provides the borrower with a specific sum of money expecting the repayment within a certain time period.
  3. List the conditions of the loan. It is up to the parties to decide how regular the payments will be and whether there is a need for an interest rate. Negotiate with your relative and find a solution convenient for both of you. You should draw a payment schedule and indicate the proper notification system that will help the lender to be sure the person that borrowed from them does not disappear.
  4. Consider adding a provision that gives the borrower the right to repay the loan in full without any fees or penalties - this is reasonable if the document does not mention an interest rate.
  5. Add the remedies available to the lender - in case the borrower violates the terms of the contract, the non-breaching party should reach out to them with a formal letter demanding payment - only after this measure did not have an intended outcome, you should file a lawsuit using the agreement as evidence of the loan.
  6. Sign and date the papers. While a personal loan is rarely notarized, if you are lending a significant amount of money or helping your relative to pay a house deposit, it is advised to find two impartial witnesses who will verify your identities and sign the document with you to add an extra level of protection to your loan arrangement.

Still looking for a particular template? Take a look at the related templates below:

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Family Loan Agreement
Loan Amount: $__________________.
Date: ______________________.
1. The Parties. For the above value received by _________________________ with a
mailing address of ________________________________________________________,
(hereinafter referred to as the “Borrower”), agrees to pay _________________________
with a mailing address of __________________________________________________,
(hereinafter referred to as the “Lender”).
Family Relation. The Borrower is the ____________________ to the Lender.
The Borrower and the Lender are collectively referred to as the “Parties,” both of whom
agree to be bound by this Agreement.
2. Payment. This agreement, (hereinafter referred to as the “Note”), shall be due and
payable, including the principal and any accrued interest, in one of the following ways:
Once per week, beginning on _________________________ and continuing every
7 days until the balance is paid.
Once per month, beginning on ___________________________ and payment is
due every 30 days until the balance is paid.
Other: ____________________________________________________________.
All payments made by the Borrower are to be applied first to any accrued interest and
then to the principal balance. The total amount of the loan shall be due and payable on the
___________________________________.
3. Interest. The Note shall:
Bear interest at a rate of %__________ compounded annually. The rate must be
equal to or less than the usury rate in the State of the Borrower.
Not bear interest.
4. Prepayment. The Borrower has the right to pay back the loan in full or make
additional payments at any time without penalty.
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Family Loan Agreement
Loan Amount: $__________________.
Date: ______________________.
1. The Parties. For the above value received by _________________________ with a
mailing address of ________________________________________________________,
(hereinafter referred to as the “Borrower”), agrees to pay _________________________
with a mailing address of __________________________________________________,
(hereinafter referred to as the “Lender”).
Family Relation. The Borrower is the ____________________ to the Lender.
The Borrower and the Lender are collectively referred to as the “Parties,” both of whom
agree to be bound by this Agreement.
2. Payment. This agreement, (hereinafter referred to as the “Note”), shall be due and
payable, including the principal and any accrued interest, in one of the following ways:
Once per week, beginning on _________________________ and continuing every
7 days until the balance is paid.
Once per month, beginning on ___________________________ and payment is
due every 30 days until the balance is paid.
Other: ____________________________________________________________.
All payments made by the Borrower are to be applied first to any accrued interest and
then to the principal balance. The total amount of the loan shall be due and payable on the
___________________________________.
3. Interest. The Note shall:
Bear interest at a rate of %__________ compounded annually. The rate must be
equal to or less than the usury rate in the State of the Borrower.
Not bear interest.
4. Prepayment. The Borrower has the right to pay back the loan in full or make
additional payments at any time without penalty.
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5. Remedies. No delay or omission on part of the holder of this Note in exercising any
right hereunder shall operate as a waiver of any such right or of any other right of such
holder, nor shall any delay, omission, or waiver on any one occasion be deemed a bar to
or waiver of the same or any other right on any future occasion. The rights and remedies
of the Lender shall be cumulative and may be pursued singly, successively, or together, at
the sole discretion of the Lender.
6. Events of Acceleration. The occurrence of any of the following shall constitute an
“Event of Acceleration” by the Lender under this Note:
A. Borrower’s failure to pay any part of the principal or interest as and when due
under this Note; or
B. The Borrower is becoming insolvent or not paying its debts as they become due.
7. Acceleration. Upon the occurrence of an Event of Acceleration under this Note, and in
addition to any other rights and remedies that Lender may have, Lender shall have the
right, at its sole and exclusive option, to declare this Note immediately due and payable.
8. Subordination. The Borrower’s obligations under this Promissory Note are
subordinated to all indebtedness, if any, of the Borrower, to any unrelated third party
lender to the extent such indebtedness is outstanding on the date of this Note and such
subordination is required under the loan documents providing for such indebtedness.
9. Waivers by Borrower. All parties to this Note including the Borrower and any
sureties, endorsers, and guarantors hereby waive protest, presentment, a notice of
dishonor, and notice of acceleration of maturity and agree to continue to remain bound
for the payment of principal, interest and all other sums due under this Note
notwithstanding any change or changes by way of release, surrender, exchange,
modification or substitution of any security for this Note or by way of any extension or
extensions of time for the payment of principal and interest; and all such parties waive all
and every kind of notice of such change or changes and agree that the same may be made
without notice or consent of any of them.
10. Expenses. In the event any payment under this Note is not paid when due, the
Borrower agrees to pay, in addition to the principal and interest hereunder, reasonable
attorneys' fees not exceeding a sum equal to the maximum usury rate of %____________
in the State of ___________________ of the then outstanding balance owing on the Note,
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plus all other reasonable expenses incurred by Lender in exercising any of its rights and
remedies upon default.
11. Governing Law. This Note shall be governed by, and construed in accordance with,
the laws of ______________________.
State
12. Successors. All of the foregoing is the promise of Borrower and shall bind Borrower
and Borrower’s successors, heirs, and assigns; provided, however, that Lender may not
assign any of its rights or delegate any of its obligations hereunder without the prior
written consent of the holder of this Note.
In witness whereof, Borrower has executed this Promissory Note as of the day and year
first above written.
13. Severability. In the event that any provision of this Agreement is deemed invalid or
unenforceable, in whole or in part, that part shall be severed from the remainder of the
Agreement and all other provisions should continue in full force and effect as valid and
enforceable.
14. Legal and Binding Agreement. This Agreement is legal and binding between the
Parties as stated above. The Parties each represent that they have the authority to enter
into this Agreement.
_______________________________
_______________________________
Borrower’s Printed Name
Witness’s Printed Name
_______________________________
_______________________________
Borrower’s Signature
Witness’s Signature
_______________________________
_______________________________
Date
Date
_______________________________
_______________________________
Lender’s Printed Name
Witness’s Printed Name
_______________________________
_______________________________
Lender’s Signature
Witness’s Signature
_______________________________
_______________________________
Date
Date
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