Repayment agreement template

As businesses grow and financial transactions become more complex, the need for clear and concise repayment agreements becomes paramount. 

Whether you're lending money to a business partner or setting terms for a personal loan, understanding the intricacies of a repayment agreement is crucial.

What is a repayment agreement?

A repayment agreement is a legally binding contract between two parties, outlining the terms and conditions for the repayment of a loan or debt. 

This type of agreement specifies the amount borrowed, the interest rate (if any), the repayment schedule, and any other relevant terms.

Repayment agreements are essential for clarifying the expectations of both the lender and the borrower, ensuring that both parties are on the same page regarding the loan's terms. 

They are commonly used in both personal and business contexts, from simple personal loans between friends or family to complex business financing arrangements.

Unsecured vs secured repayment agreements

An unsecured repayment agreement doesn't involve any collateral. This means the lender is relying solely on the borrower's promise to repay the loan. 

On the other hand, a secured repayment agreement involves collateral, such as property or assets, which the lender can claim if the borrower defaults on the loan.

It's essential to understand the type of repayment agreement you're entering into, as secured loans typically have lower interest rates due to the reduced risk for the lender.

When should you use a repayment agreement?

There are a fair few circumstances in which you can use a repayment agreement, a few of which we’ve listed below. 

• Personal loans. When lending money to friends or family, it's wise to have a repayment agreement in place to avoid misunderstandings or disputes.
  
  
• Business financing. Businesses often require loans for expansion, operations, or other needs. A clear repayment agreement ensures both parties understand their obligations.
  
  
• Property purchase. When buying property, especially with owner financing, a repayment agreement outlines the terms of the loan.
  
  
• Debt settlement. If a debtor cannot pay their debt in full, they might negotiate a repayment plan with their creditor, which would be outlined in a repayment agreement.

Key elements of a repayment agreement

• Parties involved. Clearly define the lender and borrower, including their contact information.
  
  
• Loan amount and interest. Specify the principal amount and any interest to be charged.
  
  
• Repayment schedule. Detail the frequency of payments (e.g., monthly) and the amount of each payment.
  
  
• Late fees: Outline any penalties for late payments.
  
  
• Default terms. Describe what constitutes a default and the actions that will be taken if the borrower defaults.
  
  
• Governing law. Indicate the jurisdiction that will govern the agreement in case of disputes.

Automating repayment agreements

Manually creating repayment agreements can be tedious and prone to errors. Modern businesses are turning to automation to streamline the process. Here's how:

1. Template Creation

Legal teams can set up standardized templates for repayment agreements, ensuring consistency and compliance.

2. Self-serve Automation

Users can fill out predefined fields, generating legally compliant agreements without needing constant legal oversight.

3. Approval Workflows

Legal teams can review and approve agreements before they're finalized, ensuring all terms are correct.

4. Online Signing

Use eSignatures to finalize agreements quickly and securely.

5. Centralized Storage

Store all agreements in one place, making them easy to access and manage.

Common challenges with repayment agreements

Traditional workflows can be time-consuming and difficult to work through. The four issues listed below are some of the most common for this type of contract

1. Version control. Ensuring that the most up-to-date template is always used can be challenging.
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2. Inconsistencies. Different teams might use different templates, leading to inconsistencies.
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3. Lost agreements. Without a centralized system, agreements can be misplaced or lost.
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4. Legal oversight. Without proper checks in place, non-compliant agreements might be used.

Benefits of automating repayment agreements

Put simply, there are four ways that automation addresses the above issues. 

1. Efficiency. Automation speeds up the agreement creation process.
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2. Consistency. Using standardized templates ensures all agreements are consistent.
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3. Compliance. Legal teams can ensure all agreements meet legal requirements.
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4. Ease of access. Centralized storage means all agreements are easily accessible.

How can utilizing a repayment agreement template be beneficial?

Fortunately, in today's digital age, it's uncommon for legal teams to be without a repayment agreement template. 

Most businesses have already drafted templates for straightforward contracts like repayment agreements and have them stored in shared drives for financial teams to access.

Having a repayment agreement template on hand and ready for customization eliminates the need for financial teams to linger for the legal department's assistance when setting up a repayment plan with a client or employee. This expedites the process, ensuring timely and efficient financial arrangements.

Moreover, it ensures that the bulk of the repayment agreement terms remain consistent, minimizing the potential for errors and inconsistencies.

However, even if legal teams have a repayment agreement template at their disposal, there's still a significant amount of administrative work that financial teams must undertake to finalize them. 

This becomes cumbersome as Word documents are static. Modifying a repayment agreement template often means generating new document versions and copying specific segments of the agreement into a fresh file to revise the terms.

Thus, even with a repayment agreement template available, handling these contracts manually can become a monotonous and lengthy task for financial teams.

Enhance your repayment agreement process with Juro.

Juro streamlines the entire contract procedure, allowing businesses to automate as much as 75% of contract administration and finalize repayment agreements up to ten times quicker.

If the creation and management of repayment agreements are posing challenges for your business, click the button below to discover how Juro can assist you today.