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A repayment agreement is a contract between two or more parties detailing the agreed-upon terms of a repayment plan for a loan or other expenditure. Repayment agreements are generated when financial institutions generate loans, and they can also be used by people incurring personal expenses on behalf of each other, or in other settings where a person is being asked to repay money. The agreement goes over the legal rights and responsibilities of the parties involved, establishing guidelines for repayment and penalties for failing to follow through.
A typical repayment agreement discusses the amount of money involved and whether interest is being charged in addition to the principal. It notes the date repayment is expected to start, the amount of each payment, and the length of time it should take to repay the debt. Debt calculators are available to help people calculate the terms of a repayment agreement so they can plug in the correct numbers. The agreement also provides contact information for the parties to the agreement, along with other relevant details.
Generic boilerplate agreements are available from a number of sources. Financial institutions usually have a template they use and the template is drafted and reviewed by attorneys to confirm it covers all the details. Repayment agreements are generated when loans are originated or renegotiated, as well as in other circumstances, depending on the lender and the situation.
Two people involved in a personal loan, like a parent and child, may use a boilerplate agreement available from a legal reference book or other source. They can also write out their own repayment agreement, or consult an attorney to draft an agreement appropriate for their needs. The agreement should include as much detail as possible about the repayment plan, including a discussion of what will happen if it is necessary to halt payments, renegotiate, or temporarily pay less due to hardships.
All parties should keep copies of the repayment agreement in a safe place. It contains important information about legal rights. If there is a dispute about repayments, being able to refer to the agreement can help people resolve the issue in a timely fashion. It is also advisable to keep records on payments, preferably in the same place as the agreement, to keep track of how much has been repaid and to provide proof of payment in the event of a problem. Keeping good records can save time and money in the future.