A Payment Agreement is a legally binding fillable contract between two parties (lender and borrower) mentioning a loan’s transaction details and terms and conditions of repayments. Where’s a Payment Agreement Template is a pre-made document to fill and create a payment agreement.
It enables parties to set up an agreed repayment plan, especially for large sums of money. In addition, the agreement helps both parties involved ensure each other’s security and credibility in the transaction.
Writing a payment agreement is beneficial both to the lender and borrower. In the case of borrowers, it lifts the burden of making a one-time full repayment by stretching the intervals of payment over an agreed period.
On the other hand, lenders make more money than that which they lend by charging interest. A payment agreement also acts as a point of reference for both parties involved in the transaction. This plays an important role in mitigating disputes that may arise over time. It also acts as a receipt of the loan, providing proof that money was lent to a borrower.
A payment agreement can be used when one wants to lend money or when one is interested in borrowing money.
For example:
A lender wants to set up a payment plan and create a repayment schedule that details the borrower’s periodic payment and interest.
Types of Payment Agreement
Here are a few types of payment agreement templates:
Car / Vehicle
A care or vehicle payment agreement plan takes place between a buyer and an automobile dealer. The buyer makes an upfront payment on the vehicle and covers the rest over a specified period. The buyer also agrees to pay a negotiated interest. The payment plan can only be authorized once appropriate negotiation over all these terms has taken place.
A vehicle bill of sale must be attached to the payment agreement plan. This is because the vehicle will leave with the buyer. A car/vehicle payment agreement plan must have a guarantor or co-signer who assures payment. If a buyer defaults on payment, then the dealer may repossess the vehicle.
Download: Microsoft Word (.docx)
Debt
A debt payment agreement plan is a contract between a creditor and the debtor who is either failing to pay off the amount under the already agreed plan or cannot pay immediately. It enables the debtor to pay back this/her debt to the creditor over a specified period. The creditor and debtor must negotiate the intervals on payment and the payment amount to be made at each interval. In some instances, creditors may lower the debt owed by the debtor or extend the payment period to enable the debtor to fulfill his obligation.
Often a debtor's outstanding balance is heightened by the high-interest rates charged by the creditor. The creditor can offer to lower it by offering the debtor a debt settlement agreement. A debtor may also negotiate a deal with a third party to cover the debt/outstanding balance. In such a case, the debtor will be required to include the deal in one payment agreement plan
Download: Microsoft Word (.docx)
Dental
A dental payment agreement plan is made between a dentist and a patient who cannot make full payment for the work done on his teeth. This may be due to the high cost involved in the dental procedures. The dental office and patient come up with a well-outlined schedule when payments should be made and contains information on the dental service provided, terms of the payment plan, and the date when the service was provided.
Payment periods are often on a weekly or monthly basis. A dental agreement payment plan covers a wide range of general dentistry and orthodontist treatments.
Download: Microsoft Word (.docx)
Farm Animal
An animal payment agreement plan is negotiated between a buyer and the owner of the livestock. The agreement enables a buyer to purchase livestock and make payments over a specified period. It covers a wide range of farm animals such as cows, goats, houses, etc. The farm animal payment agreement plan acts as a bill of sale recording the purchase of the animals. A maximum payment period of two-year is often offered with weekly/monthly guaranteed payments.
Before negotiations, a buyer should enlist the help of a veterinarian to check the health of the animals. On the other hand, the livestock owner is obligated to reveal any health issues the animals may have. The farm animal payment agreement plan should contain the names of the parties involved, a description of the farm animals, purchase amount and other costs like transport costs, the terms of the payment plan, and terms of a payment default.
Download: Microsoft Word (.docx)
Legal Services
A legal service payment agreement plan is a structured payment schedule formulated by a lawyer and his client to facilitate reimbursement of his outstanding fee. It, therefore, ensures that clients have access to legal services by enabling them to be made in installments. Legal service payment plans also benefit lawyers by enabling them to get more clients.
The legal service payment plan can be implemented even when the service provision is ongoing. Thus, it can be used to cover a wide range of legal practices in both criminal cases and civil cases. This type of payment plan is usually interest-free; however, defaulting clients may be required to pay penalties when payments aren't made on time. In serious cases of default payment, lawyers can incorporate a clause in the legal service payment plan that enables them to withhold services when/if a client consistently defaults on making payment. The legal payment plan must contain the names of the lawyer/law firm and client, outstanding fees, terms of the payment plan, penalties, default terms, and payment period.
Download: Microsoft Word (.docx)
Medical (Patient)
A medical payment agreement plan allows patients to pay off money owed for medical service over time. This type of payment plan may vary depending on the health care provider and the type of service. Medical payment plans can be forwarded to a collection agency when a patient consistently defaults on making his payment. However, this type of payment plan accrues zero interest.
The payment agreement plan can be established with a monthly payment via credit cards or banks. A medical payment agreement plan must include the names of the patient and health care provider/medical facility, the health care service provided, the charges for the service, the terms of the payment plan, and the payment period. It should also include any co-payment, co-insurance, or deductibles if any. This ensures that comprehensive information regarding the charges is provided
Download: Microsoft Word (.docx)
Monthly (Recurring)
A monthly payment agreement plan enables customers, debtors, or clients to pay off charges and mandatory fees in installments over a period. Payments in this payment agreement plan must be made by the due date stipulated until the end of the term. Parties involved in the monthly payment agreement plan must review state and federal laws to ensure that the payment plan terms adhere to the law. This payment plan may contain accrued interest on the money owed; however, it cannot be higher than the payment amount.
Landlords often use the monthly payment agreement plan in lease agreements. It can also be used to settle outstanding payments. This payment agreement plan must include the names of the parties involved, payment amount, monthly charges, terms of the payment plan, and due date when a payment must be made. Terms on payment default must also be included.
Download: Microsoft Word (.docx)
Past Due Rent
The past due rent payment agreement plan is used to settle outstanding rental arrears. The tenant and landlord negotiate and agree on a payment plan after consistent default in rental payment. This agreement can be used to prevent the eviction of a tenant or to settle debts by tenants who have already been evicted. It often does not include interest; however, this is up to the discretion of the landlord.
A past-due rent payment agreement plan must contain the names of the landlord and tenant, the property's address, the outstanding amount, the terms of the payment plan, and default terms. The document can be attached to the lease agreement as an addendum. If the past due payment agreement plan is court-ordered, it must be presented to the judge to show compliance. The tenant and landlord must customize this type of payment plan to fit the situation.
Download: Microsoft Word (.docx)
Photography
A photography payment agreement plan is used to outline payments for purchasing any kind of professional images with the condition that payment will be made over a specific period. This commonly involves images for people 'starting out' for business cards, headshots, modeling. In addition, watermarks on the image and any other restrictions on it are removed when signing takes place. This ensures that the party can use the images without fear of copyright infringement.
A photograph payment agreement plan must contain the names of the photographer and client, the outstanding amount, payment period, terms of the payment plan, default terms, and penalties (if any). It may be formulated before the photographer renders services. In such a case, it should be included in the photography service contract. When writing a photography payment agreement plan, the client and photographer must review copyright laws that may impact the formation of the document.
Download: Microsoft Word (.docx)
Retail Store
A retail store payment agreement plan is a payment option provided to a customer to pay for items over a specified period. For example, retail stores usually charge little to no interest in the first 6 to 24 months. This helps encourage customers to come back to the store. A retail store payment plan can cover a wide range of goods such as electronics, jewelry appliances, etc.
This type of payment agreement plan should contain the names of the client and retail store/retailer, a description of the item, charges, interest rate, terms of the payment plan, payment period, and terms of a payment default. The retail store usually makes more money off the item when it uses a retail store payment agreement plan due to the interest charged. A clause stating the retailer's right to repossess the item when a client defaults on payment should be included. This motivates clients to make timely payments.
Download: Microsoft Word (.docx)
School (Tuition)
A school (tuition)payment agreement plan is an arrangement made between parents /students of the learning institution. It is a deferred payment plan that splits tuition costs into equal monthly payments. This enables parents to make monthly installments instead of covering the entire tuition fee at once. Payments are usually made within the semester or school year period. Failure to adhere to the school payment agreement plan terms can lead to a temporary denial of services to the student.
A school payment agreement plan should contain the names of the institution and parent/student, class/semester dates and other charges, the total fee, monthly payments, payment period, payment plan terms, and terms on default payment. The learning institution and the parent must negotiate on suitable installments to be made. In addition, they must ensure they review the fee guidelines provided by the school when formulating a tuition payment agreement plan.
Download: Microsoft Word (.docx)
Veterinary
A veterinary payment agreement plan is made between a veterinarian and a pet owner. It enables pet owners to acquire medical services for their pets and settle the charges over a period. Pet owners are usually required to make payments monthly. This type of payment agreement is used to cover major medical procedures such as X-rays, surgeries, and long-term treatments. It often consists of zero interest rate; however, the terms of the agreement are subject to the negations between the pet owner and veterinarian.
A veterinary payment agreement plan should contain the names of the veterinarian and pet owner, a description of the pet and service provided, amount charged, terms of the payment plan, payment period, and terms of a payment default. It should also include any discounted changes offered. It is also important for the parties involved to review payment guidelines outlined by the veterinary center when forming the payment agreement plan.
Download: Microsoft Word (.docx)
Elements of a Payment Agreement Template
Using a payment agreement template will help the parties involved in the transaction form a clear, well-outlined arrangement by ensuring that significant elements of the agreement are included. It will also ease the process of entering information into the document.
A payment agreement template should be composed of the following elements:
The debt amount
A payment agreement template should contain the amount to be lent to the borrower. When discussing the amount, the lender should ensure to inquire why the borrower needs the money. Some loans never get repaid, such as loans arising from unforeseen events like medical expenses.
Enquiring the use of the amount also helps the lender find out if the borrower is dependable.
For example:
If one is borrowing a loan to pay off another loan, this may be a sign that the person is financially distressed.
This may impact or influence the amount of money the lender is willing to loan to the borrower.
Payments and repayment schedule
The payments and repayment schedule is crucial in the payment agreement template because it details how the money will be paid. Therefore, both parties must ensure that the payment method and schedule created in the template works for them to minimize the risk of disagreement over the loan.
Payment defaults
The payment agreement template should also contain provisions on what constitutes a default payment and what action the lender may take in such an event. This will ensure both parties clearly understand what may happen when payments are not made.
Amendments
When a loan repayment is stretched over a period, it leaves room for circumstances to arise that may impact the agreement made between transacting parties. Therefore, it is crucial for the payment agreement template to contain an amendment clause to enable modifications. This ensures that the document is flexible and accommodative.
Signatures
The payment agreement can only come to effect once both parties have signed it. The signature affirms that both parties agree to the terms stipulated in the document. It also ensures that the payment agreement has evidentiary value by proving that both parties entered into a contract.
What is a Payment Plan?
A payment plan is a structured multi-step schedule for settling debts over either an extended or standard period. When formulating a payment agreement, both the lender and buyer must participate in making the payment plan. This will ensure that both are comfortable with the schedule and raise their issues regarding it early.
Interest rate
An interest rate is an amount charged by the lender on top of the borrowed loan. It is often expressed as a percentage. Interest may be incurred from the day money is lent to a borrower or after a certain period. The payment plan usually contains little or no interest if the borrower makes timely payments.
Free Templates
Following are free customizable payment agreement templates for you:
How to Set Up a Payment Plan
Both the borrower and lender must be aware of how to set up their payment plan and payment agreement plan, as this should be a joint activity. Following a step-by-step process will ensure that all the significant areas are covered.
The following is a comprehensive process of how to establish a payment plan and payment repayment plan:
Step 1: Agree to terms
The borrower and lender must first begin by discussing the terms of the loan. It is important to have an open mind during this process as the point is to accommodate each other’s needs and concerns. The parties can each jot down their list to ensure they do not forget anything and then identify terms they agree on.
The lender and borrower must both be aware that they should consider two types of payment plans. They are:
- Goods or services: Buyers use a good or services payment plan to enable their sellers to make gradual payments for commodities or services already provided. In this type of payment plan, payments are made over a short period, and often, interest is charged. It is also common for commodities to be repossessed or services to be denied when a borrower fails to follow the terms of the payment plan
- Outstanding balance: An outstanding balance payment plan is used when one makes a payment for a commodity/service; however, there is still an amount owed. The amount owed often incurs an interest. An outstanding payment plan helps set up regular repayment periods to help settle the debt.
Debtors may be required to provide creditors with their last two years’ IRS income returns and a copy of their last paycheck when agreeing to the terms of payment of an outstanding balance. In addition, a debtor is recommended to designate 20% of their income to cover the outstanding balance to ensure that regular, timely payments can be made.
Step 2: Create a payment agreement
Once the payment plan terms have been established, both parties can start drafting the payment agreement. First, the parties must ensure they indicate their names and contact information, the amount loaned, the interest rate (if any), the repayment period, and payment instructions in the payment agreement.
When creating the payment agreement, it is also important for both parties to review the state and federal laws to ensure it falls within the legal parameters. The parties must then sign the document. Depending on the state law, the lender and borrower may be required to sign the payment agreement before a witness/notary public, especially when the payment plan indicates payments of more than $10,000 should be made.
Step 3: Begin the payment schedule
The lender must ensure that he collects the borrower’s payment details. This will ensure that both parties can start the payment schedule. In addition, borrowers can set up automated payments charged on their credit cards or bank accounts that go into the lender’s account at specific periods to help ease is the payback process. It will also ensure they don’t forget to make their payments.
Step 4: Release the debtor
Suppose a borrower follows the payment plan set out and completes his payments, including interest. Then the lender can relieve the borrower of the debt as he no longer has a financial obligation. In addition, the lender can obtain a release form to help formalize this process. Any outstanding debts shall be covered in terms of the release form.
Samples for You
Following are some free downloadable templates for you:
Conclusion
A payment agreement enables parties to engage in a flexible transaction that suits their situation. Parties should negotiate on mutually suitable terms of payment. A payment agreement ensures that an individual has access to commodities or services. It also helps resolve repayment disputes or mitigates conflict surrounding repayment.
