How to Customise a Contract Template for Borrowing Money for Your Needs

When you need to borrow money, having a written agreement is essential, even if you’re borrowing from friends or family. A well-crafted contract template for borrowing money ensures that the terms are clear and legally binding for both parties. By customising the agreement to your specific situation, you can protect your interests and maintain healthy relationships with your lenders. In this blog, we’ll guide you through the steps to effectively tailor a loan agreement to your needs.

 

Start with a Standard Contract Agreement for Borrowing Money

 

Before you begin tailoring your contract, it’s helpful to start with a standard borrowing money agreement form. You can find many free templates online that cover the basic elements of a loan agreement. Look for a template that is straightforward and easy to understand.

 

Some key sections to look for in a standard agreement for borrowing money samples include:

 

• Loan Amount

• Repayment Terms

• Late Payment Penalties

• Interest Rate (if applicable)

• Collateral Details (for secured loans)

 

Identify the Parties in Your Promissory Note for Borrowing Money

 

One of the first things to customise in your contract for borrowing money is identifying the lender and borrower. Be sure to use full legal names and include contact information like mailing addresses. If either party is a business entity, specify the exact legal identity.

 

For Example:

• Lender: Rahul Sharma, residing at 123 MG Road, Mumbai – 400001

• Borrower: Priya Patel, residing at 456 Linking Road, Mumbai – 400054

 

Specify Loan Amount and Interest Rates

 

Clearly state the total amount being borrowed, both in numeric and word form, to avoid any confusion. Suppose the loan will bear interest; detail the rate, how it’s compounded, and the calculation method.

 

Example:

• Principal Loan Amount: ₹2,00,000 (Rupees Two Lakh only)

• Interest Rate: 9.1% per annum, compounded annually

 

Use an online personal loan interest rate calculator, like the one offered by Airtel Finance. This tool will help you to determine your monthly payments based on the loan amount, interest, and repayment term.

 

Outline Repayment Terms in Your Contract Template for Borrowing Money

 

Your customised contract template for borrowing money should specify the loan duration and repayment schedule. Include start and end dates, payment frequency and amounts, and how payments will be applied to the principal vs. interest.

 

For Instance:

• Loan Term: 24 months, starting on 1 June 2023 and ending on 1 June 2025

• EMI: ₹9,167 per month, due on the 5th of each month

• Payment Allocation: EMIs will first be applied to outstanding interest, then to the principal

 

Allow for Prepayment

 

Consider adding terms that allow the borrower to make extra payments or pay off the loan early without penalty. You might even include an incentive, like a small discount on interest, for early repayment.

 

Define Late Payment Penalties

 

To encourage timely payments, your agreement should define what constitutes a late payment and any applicable late fees. Also, specify the grace period and process for getting back on track after a missed payment.

 

For Example:

• Late Fee: 2% of the outstanding payment amount.

• Payments will be considered late if not received within 7 days of the due date.

• 15-day grace period to make up missed payments before the loan is considered in default

 

Include Collateral Details for Secured Loans

 

Use an asset, like a Fixed Deposit, as collateral for your loan. Then, your agreement must include identifying details about the security and the circumstances in which the lender can claim it.

 

Example:

• Collateral: Fixed Deposit #123456 with Airtel Finance, current value ₹2,50,000

• In the event of default, the lender can liquidate FD after providing the borrower with 30 days’ written notice.

 

Add Lender and Borrower Representations

 

Towards the end of your contract, include sections where the lender and borrower make certain representations, such as:

 

• All information provided is accurate to the best of their knowledge.

• Each party has the full legal authority to enter into the agreement.

• The lender is not engaged in any illegal activities.

• The borrower is not in default on any other loans.

 

Specify Governing Law and Jurisdiction

 

Indicate which state’s laws govern the interpretation of the contract agreement for borrowing money. Also, specify where any legal proceedings would take place. This is especially important if the lender and borrower reside in different states.

 

Example:

This agreement shall be governed by the laws of Maharashtra. Any disputes will be resolved in the courts of Mumbai.

 

Customising a loan agreement allows you to create an arrangement tailored to your unique lending situation. Specifying key terms like repayment, interest, late fees, and collateral can protect your interests and reduce the risk of misunderstandings.

 

Before finalising your contract, it’s a good idea to have it reviewed by a legal professional. Once signed by both parties, ensure that each has a copy for their records.

 

When you’re ready to borrow, consider a personal loan from Airtel Finance. It offers competitive interest rates and an easy online application through the Airtel Thanks app. They can help you get the funds you need to achieve your goals. Additionally, you might explore a promissory note for borrowing money as a flexible option. Check your personal loan eligibility and required documents today.

 

FAQs

 

1. What is a contract template for borrowing money?

A contract template for borrowing money is a pre-formatted legal document. It outlines the terms of a loan agreement between a lender and a borrower. This typically includes details such as the loan amount, interest rate, repayment schedule, and penalties for default.

 

2. Why should I customise a contract template instead of using a standard one?

Customising a contract template allows you to tailor the agreement to your specific lending situation. This further ensures all relevant terms are addressed and both parties are protected.

 

3. What key elements should I include when customising a borrowing money contract?

When customising your contract, be sure to include the parties’ details, loan amount, and interest rate. Also, include the repayment schedule, late payment terms, collateral specifications, and governing law.

 

4. Can I change the repayment terms in a contract template?

Yes, you can modify the repayment terms in your contract template, such as payment frequency, amounts, and loan duration. This will assist you to suit your unique borrowing arrangement.

 

5. How do I include interest rates in my customised contract template?

Specify the annual interest rate, how it’s compounded (monthly, annually, etc.), and the calculation method used. These all will aid in determining the periodic payment amounts in your customised contract.