Loan Agreement Help Guide

LegalNature's loan agreement specifies all of the important terms and conditions for repayment of a loan. The loan that the lender provides to the borrower may be in the form of money or property, and you can choose to include multiple borrowers, lenders, and guarantors depending on the requirements of the transaction. The information below will guide you through some of the important issues and considerations you will encounter when creating your loan agreement.

Party Information

You will begin by entering the name and address of each borrower and lender. If a party is a business, be sure to include the full legal name of that entity, such as "eDemand, Inc." If you include multiple borrowers, each borrower will be "jointly and severally liable" under the agreement. This is legal speak that means each borrower will be required to repay the full amount of the loan should another borrower default on its obligation. However, if a borrower is ever forced to pay back part of another borrower's portion of the loan, often that borrower will be able to then obtain a judgment in court against the defaulting borrower for the money it is owed. Joint and several liability will also apply if you choose to include one or more guarantors, discussed below.

Transaction Details

Next you will enter the details of the transaction. Be as specific as possible in describing what the borrower is receiving from the lender, whether it is a mortgage loan, goods, services, etc. You will then describe how the lender expects to be repaid. You will also have the option to include miscellaneous terms and conditions later in the document should you need to further customize your agreement.


Answer whether or not the lender requires any collateral to ensure repayment. For example, in a mortgage agreement the collateral is the house itself. However, collateral is often other types of property, such as the borrower's inventory, real estate, or accounts payable. If the borrower defaults on repayment, the lender gets to keep or sell the collateral.


Prepayment refers to the borrower's ability to repay the loan ahead of schedule. Often, borrowers are prohibited from, or receiving a fee for, making prepayments because it prevents the lender from receiving steady payments and collecting a predictable amount of interest on the loan. If you choose to allow prepayment, you can then choose to require a prepayment fee for a percentage of the amount of the principal prepaid.

Notary and Witness

Lastly, you will be asked whether or not you want to include spaces for a notary and/or witness to sign. It is always recommended to include a notary to help prove the validity of the document should there ever be a question. For the same reason, including a witness is helpful. If possible, it is a good idea to include both.


Here you have the option to include one or more guarantors to guarantee the repayment of the loan should a borrower be unable to pay part or all of the outstanding debt. A separate guarantee agreement will automatically be included for each guarantor to sign along with the lender(s) and any notary or witness included.

As discussed above, each guarantor will be jointly and severally liable with each borrower and with each other guarantor for the full repayment of the loan. This helps assure that the lender will be repaid first and in full, and then the other parties can sort out how much they owe each other after the fact should the need arise.

Executing Your Loan Agreement

After you are done filling out the form, simply have the borrower, lender, and any notary and witness available sign the document. Again, although a notary and witness are not required in most jurisdictions, it is always a good idea to include them. When the document has been signed and witnessed, you are done! Make sure each borrower, lender, and guarantor (if any) each get a copy.

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