Lending money to a friend can be a very kind way to help someone out in his time of need. Because you know and trust the friend, it may be tempting to lend or receive money without any paperwork to verify the terms of the money being lent. However, situations can arise that can lead to strained or broken friendships. To ensure your generosity does not get taken advantage of, it is a good idea to draft a payment agreement to accompany the loan.
Indicate on the document who is lending the money to whom. On formal contracts, each person is given a title, such as "lender" or "borrower," and is addressed by this title throughout the document. This is not necessary in a written agreement between friends.
Note how much money is being lent and the date the money was given. This should not be a rough estimate, but an exact account of what money is being lent and when the repayment plan will become effective. It is not necessary, but you can detail how the money will be used.
Detail the terms of repayment. This is perhaps the most important part of the document. This should be as detailed as possible. For example, if the loan is to be paid in full within six months, this should be outlined. If interest will be applied to the loan, the interest rate and total interest to be repaid should be described in full.
Write a statement that indicates that both parties have reviewed the payment document and are in agreement on the terms outlined. Have both parties sign and print their names at the bottom of the document in acknowledgement of the agreement. Consider having a witness sign the document as well to indicate that she witnessed both parties agree to the terms of the loan.