If you need to set up a payment plan with someone, you can use our free payment plan agreement template to outline all the terms and conditions of a loan. With all the information you need, our payment plan agreement PDF or Word templates can help you with your financial dealings. If you need help building your payment agreement, our document builder makes it quick and easy to complete.
What Is a Payment Agreement?
A payment plan agreement is a legal document between a lender and a borrower. It outlines the terms agreed between the parties to set up a mutually agreed repayment schedule. They are commonly used when the borrower or debtor, can’t, or doesn’t want to, pay a full amount for goods or services in a single installment. They’re typically paid by ACH Debit on a recurring basis.
Alternate names for this document include:
- Payment contract
- Installment agreement
- Payment agreement letter
What is a payment agreement used for?
Payment plan agreements are used in lots of different settings to act as a legally binding contract between two parties. Some common examples of where payment agreements are used include:
- Buying a car
- Overdue rent
- Tuition fees
- Legal services
How to Write a Payment Plan Agreement?
There are several elements you need to consider when writing a payment plan agreement. Although payment plan agreements can be structured in different ways, you will need to make sure the correct outcome of paying for the goods or services is achieved.
Alternatively, you can use our payment plan document builder where you’ll just have to insert the answers to the below:
The debt amount
The headline of a payment plan agreement is to pay off the total amount to the lender. In the agreement, you need to outline what the loan is for and how much the total debt is.
Another important element to include when writing a payment plan agreement is when the total debt needs to be paid by. Make sure you include the date the agreement is starting and when it will end.
Payment and payment method
When writing a payment agreement, you need to consider the payment method and the payment frequency. Will the borrower pay the full amount as a lump sum, or will they pay in installments? If you agree to go with regular payments, you will need to decide how often the payments will be made and when. You will also need to agree on what payment method will be used — typically installments will be paid by ACH Debit.
If you’re creating your own payment plan agreement, you should also consider additional terms such as future amendments, legal fees, indemnification and an acceleration clause if the borrower cannot render payment.
Your payment plan agreement won’t be legally binding without written consent from both the borrower and the lender. Signing the contract acts as legal proof that the involved parties have accepted the terms of the agreement.
Sample Payment Plan Agreement Template
Here’s what a typical payment plan agreement looks like:
State of _____________
This Payment Plan is between ________________________ [Name of lender] (the “Lender”), of
________________________________________ [Address of lender] and ________________________
[Name of borrower] (the “Borrower”), of ________________________________________ [Address of
borrower] also individually referred to as “Party,” and collectively, “the Parties.”
This Payment Plan is effective as of _____ day of _______________, 20_____ (the “Effective Date”). By
signing this agreement, the Parties agree to be bound to the terms and conditions below:
1. Purpose: This Payment Plan established between the Lender and the Borrower will cover the
total amount owed by the Borrower, which is $________.
The Borrower’s debt is in relation to (Check one)
☐ _________________________________ [description]
☐ the exhibited scheduled payment plan attached as Exhibit A.
All terms used in this agreement will have the same meanings as in the original documents and
agreement(s). Except when explicitly stated, the original agreement(s) will remain unamended
and in full force and effect.
2. ☐ (Check if applicable) Deferral: The deferral will apply from ___________, 20___ and will apply
for ______________ until ___________, 20___ covering the Borrower’s debt as described under
the section titled “Purpose” above.
3. Payment: (Check one)
☐ Lump sum: The Borrower will make payments in the sum of $________.
☐ (Check if applicable) as outlined in Exhibit A.
☐ Installments: The Borrower will make payments in the sum of $________ starting on
___________, 20___ and ending ___________, 20___.
Schedule: (Check one)
☐ on ___________ [day of week] ☐ every week ☐ every two weeks.
☐ on ___________ [day of month] ☐ every month ☐ every two months.
No interest will be applicable for any of the installments.
Payment can be made with (Check all applicable): ☐ Cash ☐ Electronic Transfer ☐ Personal
check ☐ Cashier’s check ☐ Money order ☐ Credit card ☐ PayPal ☐ Other: ______________.
☐ (Check if applicable) Payments will be (Check one) ☐ delivered by hand ☐ mailed to at
☐ (Check if applicable) Discount: A discount of $________ will be given in exchange for
__________________________. [Discount reason] This discount will be applied ☐ once only ☐
every payment period ☐ every other payment period ☐ Other: ______________.
4. Indemnification: The Lender releases any other claims against the Borrower in relation to
penalties and fees that result from any damages or deficiencies prior to this agreement. However,
no obligation will release the Borrower from their obligations as laid out in this agreement or limit
the rights of the Lender as set out in this agreement.
5. Acceleration Clause: If the Borrower fails to render payment ________ days after (Check one)
☐ last payment due date specified by Lender ☐ the dates set out in Exhibit A, the full amount that
is owed will instantly become due. Any further failure to pay will give the Lender the full right to
6. Representations and Warranties: Both Parties represent and agree that they are fully
authorized to enter into this agreement. The obligations and performance of either the Party will
not infringe or violate the rights of any third party or any other agreement between the Parties or
either of the Parties and any other organization, business, or person, or any government or legal
7. Applicable Law: This agreement will be governed and construed in accordance with the laws of
the State of ____________.
8. Severability: If any provision in this agreement is held illegal, unenforceable, or invalid by any
competent court in the applicable jurisdiction, the same finding will only apply to the provision and
the rest of the agreement will remain valid and enforceable.
9. Waiver: If either Party fails to exercise any power, right, or privilege under this agreement, that
will not be construed as a waiver of any future exercise of that power, right, or privilege.
10. Legal Fees: If a dispute resulting in legal action arises out of this agreement, the successful
Party will be entitled to its legal fees, including, but not limited to collection fees and attorneys’
11. Entire Agreement: The Parties acknowledge and agree that this agreement constitutes the
entire agreement between the Parties, unless both Parties agree on modifying the contract.
12. Modification: Modification of this agreement is only valid if made in writing and agreed upon both
the Lender and the Borrower.
IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as on the Effective
Date written above.
By: ______________________________ Date: ______________
Borrower Full Name
By: ______________________________ Date: ______________
Lender Full Name
You can create this payment plan agreement letter with our free payment plan agreement template builder.
Why Make a Payment Plan Agreement?
There are a number of benefits of making a payment plan agreement:
- If drafted well, a payment plan agreement can be used as a piece of evidence in court. This can be helpful if the borrower can’t pay or doesn’t follow the terms of the agreement and the lender needs to take the situation to court to get their money back.
- A payment plan agreement provides explicit instructions on how payment should be made and when. This helps avoid any confusion when lending and repaying debts.
- It provides a level of protection for both the lender and the borrower. The payment plan agreement acts as legal proof to show the total amount owed. As an additional level of protection, you could sign the agreement in front of a notary or get witnesses to sign the document too. Both the lender and the borrower will receive a copy of the agreement.
Payment plan agreements are an effective way to make sure a lender is paid the total amount from a borrower — download a PDF or Word Payment Plan Template now. If you need to set up a payment plan with someone, you can use our free payment plan agreement template to outline all the terms and conditions of a loan. With all the information you need, our payment plan agreement PDF or Word templates can help you with your financial dealings. If you need help building your payment agreement, our document builder makes it quick and easy to complete.