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What Is a Simple Loan Agreement [A Free Printable Cash Advance Loan Agreement Template]

    If you have ever taken out a loan, you already have an idea of what a simple loan agreement is. Such an agreement is a contract between a borrower and a lender that outlines all the important loan terms and conditions, along with the responsibilities of the parties.

    If you deal with financial institutions, they typically have a printable loan contract form or sample. But what to pay attention to if you’re going to complete an agreement with another individual? Let’s find out what basic information should be displayed in such a document.

    What Is a Cash Advance Loan?

    a woman pointing at the notebook symbolizing a loan agreement sample
    Cash Advance

    When you need a few hundred dollars fast, this type of borrowing can give you what you’re looking for. A cash advance loan is a short-term debt that allows you to get a small amount quickly, typically without going through a complicated application process and hard credit check.

    Cash advance loan terms depend on the lender. Most loan providers offer sums of up to $1,000 and limit your repayment terms by your next paycheck. This way, you borrow money against your next wage and should repay the amount plus interest.

    What Is a Simple Loan Agreement?

    A simple loan agreement is a document that sets out the rights and responsibilities of the borrower and lender associated with a specific financial obligation. Also, the contract contains information about the amount borrowed and its repayment terms. This document is designed to protect both a borrower and a lender in case of disputes and violations by the other party.

    To be valid, a loan agreement needs to be registered in a proper way. Otherwise, it won’t be considered legal. This means that a lender won’t be able to recover the money if a borrower fails to pay. More than that, if a lender defaults, the borrower will also not be able to dispute. An agreement is considered registered when it has the signatures of all parties.

    Types of a Loan Agreement

    There are two types of loan agreements: secured and unsecured.

    A secured loan agreement is a contract with an attached repayment guarantee. Simply put, it’s an agreement that provides for some security that a borrower puts against the borrowed amount. This pledge is the prevention of losses for a lender. If a borrower stops repaying a loan, a lender can repossess the collateral to cover financial losses. The most common types of collateral are a house, car, savings account balance, or other valuable assets. As secured agreements have collateral backing, they usually come with more favorable loan terms.

    An unsecured agreement is one that is not backed by any security or guarantee except for a borrower’s signature. It typically implies other forms of penalties in case of missed or late payments. The most common of them are late fees. As such agreements are considered riskier for lenders, they typically have higher interest rates and stricter eligibility criteria.

    A Promissory Loan Note vs. Cash Advance Loan Agreement

    A promissory note and a cash advance loan agreement are related to one type of loan contract. However, a loan agreement is a more extended version that contains detailed information about all the parties, loan features, and other terms and conditions. A promissory note is a borrower’s written promise to repay the loan. Also, the difference is that the loan agreement must be signed by both a lender and a borrower to be legal, while a promissory note is usually signed by a borrower only.

    What Information Should Be Included in a Money Agreement Contract?

    In order for the loan agreement to fully protect you and work for both parties, you need to know exactly what information should be displayed in it. Here are the main points that should be included in the contract.

    Personal and Contact Information of All Parties

    First, a cash advance loan contract must specify what the parties of the agreement are. This way, it should contain the name of a lender and borrowers, as well as a cosigner, guarantor, or witness, if any. Also, addresses of all parties, contact numbers, ID proofs, and other legal information should be displayed. This information will help you contact a borrower or a lender in case of any challenges, questions, or disputes. 

    Borrowed Amount

    A loan agreement must contain information about the exact sum that was transferred to the borrower and is now repayable. Usually, the amount is indicated both in numerical form and in words.

    Dates of Commencement and Repayment

    These are commonly the date when the loan agreement was signed and the date till it’s valid. As long as the term of the loan agreement has not expired, it must be kept by both parties. We also recommend saving it later on if any disputes will arise after a borrower fulfills a debt payment obligation.

    Repayment Terms

    Loans repayment terms show how and when you must repay the money. Cash advance loans may either have an installment structure or must be repaid in one lump sum in 2 to 4 weeks. By specifying loan repayment terms in a loan agreement, a borrower will know the exact repayment date and be able to plan the budget properly.

    The lender will also know the exact date by which they must receive the whole loan or monthly payment. If a borrower pays after the due date, late fees and other penalties can be applied.

    This clause may also specify to what payments coming from the borrower will be applied first. Often, the agreement states that all payments made by the borrower are first applied to any accrued interest and second to the principal balance.

    Payment Plan

    If a loan has an installment structure, a lender can attach a payment schedule that shows a monthly payment amount and the date of each payment over the whole loan lifetime. This will help a borrower understand the frequency of payments along with the total amount that will be repaid in the end. 

    A loan agreement can also specify that payments are due on a specific date of each month. This way, it may not include a repayment schedule. But don’t worry. You can simply download a payment plan template on the Internet. Then, enter the dates and amounts there so that you won’t miss payments and will have a clear understanding of how much money you need each month to cover your debt.

    Loan Cost

    Besides an initial loan amount obtained from a lender, a borrower must also repay an interest rate amount. This is the sum that the lender earns for the service provided to you. Interest rate is typically expressed in a percentage of a loan amount.

    Typically, an annual percentage rate is used to show a borrower the loan cost for a year of money usage. Your loan cost will be divided by the number of months of your repayment terms, so you will pay it off partially.

    However, the cost of short-term loans can also be expressed in a flat fee, not an APR. This way, the total cost is typically repaid in one large payment on the due date.

    Payment Method

    While some lenders allow online repayment by making an automatic withdrawal from a borrower’s bank account, others may ask you to write a postdated check or pay in a store. To avoid problems and misunderstandings between the parties, it’s recommended to indicate the loan repayment method in the contract.

    Securing the Loan, If Needed

    If the loan agreement is secured, it must specify what kind of repayment guarantee is used. Also, a loan contract should contain information about its estimated value and the conditions under which the confiscation or return of the asset to the borrower may occur.

    Ways to Resolve Potential Disputes

    This clause should outline the actions that each party must take to settle the conflict before making a legally binding decision. Taking these actions can help the parties come to a consensual resolution.

    Consequences and Penalties

    If either party violates its obligations, this clause of the agreement will provide what discipline the other party can apply for this. For example, a lender should specify fees and penalties that may be charged for late, missed, or early payments.

    Options to Change Loan Terms

    Here you can specify options for a modification of the loan agreement. Sometimes, they may be represented in the form of an additional contract between the lender and borrower to change the terms of an original loan.


    All parties must sign a loan agreement to make it legally binding. Currently, this can be done remotely and electronically. However, some lenders may still ask a borrower to visit a store to sign a loan agreement.

    Main Legal Terms You Can Find in a Loan Agreement

    Loan principal: A principal loan amount is the sum that a borrower gets from a lender. This amount doesn’t include interest rates and other associated fees.

    Interest rate: An interest rate is the percentage of a loan amount or a flat fee that a lender gets from a borrower for the use of the borrowed money.

    Fixed interest rate: Fixed rate refers to an interest that stays constant over the whole loan lifetime and doesn’t change under economic conditions.

    Variable interest rate: A variable rate is a rate that can fluctuate over the loan lifetime at the lender’s discretion or because of economic conditions.

    Compound interest: Compound interest is the one that a lender charges not only on loan principal but also on any accumulated interest.

    Usury: This is an illegal charge of sky-high and unaffordable interest.

    Repayment schedule: The repayment schedule is a plan of loan repayment. It shows how and when a borrower must repay the money (weekly or monthly, in installments or in one lump sum, etc.).

    Late fees: Late fees are penalties that a lender charges when a borrower fails to pay on time.

    Acceleration: Acceleration is a process of recovering the full amount of the debt if a borrower violates the terms of the loan agreement.

    Prepayment penalties: Prepayment penalties are charges set for early payments in order to prevent losses associated with interest payments.

    Guarantor: A guarantor is a third party that is responsible for fulfilling loan payment obligations if a borrower defaults.

    Co-borrower: A co-borrower is an individual who takes shared debt with a primary borrower and must repay the loan along with them.

    Cosigner: A cosigner is a person that helps another individual with a low borrowing capacity to qualify for a loan.

    Foreclosure: Foreclosure is a process of repossessing a borrower’s property used as a pledge if a borrower defaults on their loan.

    Forbearance: Forbearance is the ability to temporarily suspend loan payments in case of financial difficulties. 

    Do I Need a Written Loan Agreement When I Lend or Borrow Money?

    The simple answer is yes. You need a loan agreement if you want to prevent any risks associated with money losses or illegal actions against you. Both borrowers and lenders can be unreliable. A verbal agreement is not considered legal and will not help you collect a debt from a defaulter or, for example, return money that you paid to a scammer upfront.

    Additionally, a loan agreement sets clear terms and conditions. This reduces the risk of misunderstanding and disputes.

    How to Write a Simple Loan Agreement?

    If you’re going to lend money to another individual, you may wonder how to write it in a way to protect yourself from a borrower’s default. Although there are many loan agreement templates, you need to know the basics in order to draw up the one that will display all the important points and prevent you from losses or unfavorable terms.

    You can always turn to a lawyer if you find the process confusing. However, you can also do it yourself with the help of our ultimate guide. Here are the major points.

    Determine all parties

    Identify who will be involved in the process, including a lender, borrower, cosigner, co-borrower, or guarantor, if any. Specify their names, contact information, and ID details.

    Clarify a loan purpose

    This step will help you determine which type of loan agreement you need to draft. For example, loans for individuals come with contracts that are different from those for commercial purposes. Also, auto loan agreements may include a repayment guarantee in the form of a purchased vehicle, while personal loan agreements are typically unsecured.

    Set major loan terms

    These terms include a loan amount, interest rate (you should specify its percentage and whether it’s fixed or variable), pay-off period, and origination fees. Also, you can specify a down payment, if any, and clarify whether the loan has balloon payments.

    Determine the type of security

    If you’re going to complete a secured loan agreement, you need to determine what asset will be used as security. Also, specify its cost and the conditions for its seizing or return to the owner.

    Specify the repayment schedule and method

    Decide on the way and frequency of payments. You can also attach a repayment schedule with exact sums and due dates to make it easier for the borrower to navigate.

    Determine additional fees and penalties

    Specify what will be default and prepayment provisions in case a borrower will pay early or be late with payments. You can set a flat fee or a percentage of a debt amount.

    Check your loan agreement carefully

    After you write an agreement, review it once again in order to avoid mistakes or ambiguous formulations. If there are some statements that can be understood in more than one way, try to rewrite an agreement and make it more transparent and specific.

    Sign the contact

    After you draft and check the agreement, all the parties must sign it to make it valid.

    File the document until it expires

    After the contract is signed and entered into force, you should file your copy until the debt is paid off in full.


    Are There Any Legal Requirements for a Loan Agreement?

    Legal requirements depend on the local state or federal law. Commonly, a lender must disclose loan terms and conditions, specify the loan security, the repayment schedule and method, and any fees or penalties that may be charged. Also, a loan agreement must be signed by all parties to be valid.

    Who Needs to Prepare a Loan Agreement?

    Drafting a loan agreement is typically a lender’s responsibility. In some cases, a borrower may also write a money agreement contract with the help of a lawyer.

    What Penalties Can Be Applied If a Lender Defaults on a Loan Agreement?

    This depends on the terms of your contract. A borrower can sue the lender or claim other forms of relief.

    What Penalties Can Be Applied If a Borrower Defaults on a Loan Agreement?

    Commonly, a borrower will have to pay late fees and penalties. Additionally, a lender may accelerate the loan, provided that it’s set in your loan agreement. If a loan agreement is secured, a lender can also foreclose collateral.

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    Betina Jessen

    Betina Jessen

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