Payment Plan Agreement – We have worked closely with legal experts and adjusters to design a simple payment agreement template (PDF and Word) to assist you in your financial dealings.
A payment agreement is a legal contract between the lender (borrower) and the payer (borrower) that sets the terms of installment payments. Let’s look at a quick example to explain the nature of a payment agreement.
Payment Plan Agreement
Creditors and debtors can be natural persons or any business entity. Also, payment contracts can be used for personal and commercial transactions.
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If not managed in the right parameters, payment agreements can quickly escalate into unpleasant legal claims and disputes. That’s why we’ve created a simple payment contract template to help protect lenders and borrowers in debt-related transactions.
Borrowing money is one of the most common financial transactions in society. Whether borrowing money from parents or negotiating with a potential business partner, most of our dealings involve debt.
It’s tempting to rely on handshakes or verbal agreements when arranging a payment plan. We often hear, “I promise I’ll pay you back.”
However, no matter how pure our intentions, things come up in life, and sometimes debtors cannot pay their creditors.
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If you don’t use a payment contract template for these types of transactions, the creditor’s risk is that you won’t get your money. There are no legal consequences if your debtor fails to pay.
A payment agreement contract holds all parties accountable for the payment plan and acts as a reference when disputes escalate.
While payment agreements can be complex with a list of terms, when it comes down to it, only a few elements matter. We’ll look at each one below.
The basis of your payment agreement is based on the amount the borrower wants from the lender.
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Context is important here, and as a lender, it’s important to know what the borrower wants from the fund. Is it for a large asset, business, student payments or medical payments?
If the borrower wants to use the money for their living expenses, it may mean that they are struggling to generate enough income to meet their basic needs. On the other hand, if your creditor needs funds for an unexpected payment, you may feel safe about borrowing money.
There are no hard and fast rules, but ultimately you need to know how much you are willing to trust the other party.
Another important element of payment agreement templates is to capture the borrower’s payment schedule. The parties must agree on how and when payments will be made.
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For example, creditors may require that payments be made by direct deposit and be made by the 15th of the month.
Of course, the details of the payment plan can be negotiated before the contract is signed if the borrower has different payment methods and frequency preferences.
The key to a successful repayment agreement is to ensure that borrowers make regular payments according to the terms of the contract. If borrowers fail to comply with the payment plan, it is common for creditors to claim the remaining amount, including interest.
For example, if a debtor requests an extension of the payment plan or requests funding, then you need a clause in your template that ensures that all parties sign the new terms of the agreement.
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The payment agreement is not effective without the written consent of the creditor and the debtor. The signatures confirm that all parties accept and agree to the terms of the payment contract.
With payment arrangements, it’s easy to rely on emails, messages or conversations to form the basis of your agreement. While these interactions may look like contracts, a signed agreement gives you more protection and a more visible agreement from all parties.
While there are no set rules for what your contract should include, below is a list of standard inclusions:
We recognize that you may need to modify our template based on your transactional needs. We’ve made the payment agreement form available in Word so you can make any changes you need.
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If you want to make significant changes to the template, we recommend that you consult with an attorney to ensure that you have adequate protection.
– This Payment Agreement (hereinafter the “Agreements”) was signed on ______________ (“Effective Date”), during __________________________, ______________ (hereinafter referred to as the “Debtor”) and has an address of ______________. Address ______________ (hereinafter referred to as “Creditor”) (collectively the “Parties”).
– The parties agree to guarantee the amount of the debt by entering into a new agreement, where the amount of ______________ mentioned above will be established in a structured payment agreement, according to the conditions provided below .
– The borrower guarantees, as well as indicates that the parties agree on a payment plan to guarantee the vacancy in a scheduled manner according to the provisions of this Agreement.
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– If the borrower does not pay according to the payment plans within a reasonable time, the creditor has the right to immediately declare the remaining amount and, if any, interest.
– If any of the provisions of this agreement is found void and unenforceable by a court of competent jurisdiction, the remaining provisions will be enforced according to the intention of the parties.
– Any dispute or difference arising out of or related to this Agreement shall be submitted to ______________ (Arbitration/mediation/negotiation) in accordance with and in accordance with the laws of ______________.
– This Agreement constitutes the entire Agreement and understanding between the Parties regarding the subject matter hereof, and supersedes all prior agreements, understandings, inducements and conditions, expressed or implied, oral or written, of any nature regarding the subject matter. . the subject matter of which is controlled and superseded by these specific terms is any performance and/or trade use inconsistent with these terms.
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– The parties agree that the changes made to this Agreement must be made in writing, where both parties to this Agreement must sign them.
– The Parties accept the terms and conditions set forth in this Agreement, as evidenced by the signatures below: A payment agreement (or amortization agreement) specifies an installment plan to pay the balance in a certain period of time. . This is usually when an amount is too much for a debtor to pay in one payment.
ACH Recurring Authorization – Usually required as part of a payment agreement to automatically withdraw funds from a debtor’s account.
A payment plan is a way for someone to pay for something at a specific time. This is usually when a person owes an amount that cannot be paid, and the creditor allows the payment to be made over a period of months or years.
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Under most payment plans, there is little or no interest as long as payments are made on time. This is a common incentive for the borrower not to miss his payment schedule.
Establishing a payment plan requires the consent of the creditor and the borrower and must be specified in an agreement. To pay off the balance, a payment plan is often the borrower’s “last resort” to clear the debt.
The borrower and lender must agree on a payment arrangement that benefits both parties. There are two (2) types of payment plans:
After agreeing on the balance owed, the terms of the payment plan should be written in a simple agreement. There is usually no guarantee that borrowers will pay the interest-free payment or the full discounted balance.
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For payment plans in excess of $10,000, it is recommended that both parties attach a Notary Declaration to the agreement and sign it in front of a notary public.
Use the Credit Card/ACH Authorization Form to obtain the borrower’s payment details. Most lenders will require the borrower to set up automatic payments to the borrower’s credit card or bank account for each payment period.
Once the outstanding balance is paid in full, the borrower is released from any financial liability. This can be completed through a discharge form and can also be used by the borrower to clear outstanding balances on their credit report.
The debtor: [NAME OF DEBTOR] [MAIL ADDRESS] (the “Debtor”) with email address and acknowledges that he is indebted to:
Payment Agreement Contract
II. BALANCE As of the Effective Date, the Debt owed to the Creditor is $[AMOUNT] (the “Current Balance”): (check one)
☐ – Pay the interest. The total amount has interest at [#]% compounded: (check one)
☐ – They are not interested. There is no interest related to the total amount. The Debtor’s sole obligation to the Creditor is to pay the principal balance.
IV. AMOUNT OF DISCOUNT. In consideration of the Debtor’s faith in paying the Current Balance, the Creditor agrees to: (check one)
Deferred Payment Plan Guidelines
☐ – DO NOT Offer a Discount. The borrower is obligated to pay the entire Current Balance
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