Unsecured loan agreement: person to person; private or business
An agreement between a lender, who may be an individual or a corporate body, and a borrower, who is a individual person (or a company). The loan is unsecured with no guarantor. Likely to be used for family loan arrangement or loan to director by his own company. Provisions to protect the lender. Options for alternative repayment provisions and lender actions if borrower defaults.
- Solicitor approved
- Plain English makes editing easy
- Guidance notes included
- Money back guarantee
About this unsecured loan agreement
A verbal agreement may be enough to lend small sums to people you trust, but even among family and friends, a formal record of terms will prevent a disagreement later. Where the risk of default is higher, or the arrangement is more complicated, it is essential to record the arrangement in a document like this one.
This unsecured loan agreement is intended for use in a family situation or between two people who know each other well, or to a director by his own company, where security is not required. It may be used for a loan by or to a limited company. If you are the borrower, you have the opportunity to edit any point you would prefer not to include.
An unsecured loan is money lent from one party to another without any collateral to secure its repayment. In most cases, these types of loans are considered somewhat high-risk, since the lender does not usually have any way of forcing the borrower to comply with the terms or make payments on time short of legal action. For this reason, most unsecured loans carry relatively high interest rates and are often only available to those with strong credit scores.
Reasons for Pursuing an Unsecured Loan
Unsecured loans are used primarily for small, short-term expenses, such as medical crises or wedding or funeral costs. The purpose of the loan does not affect the terms. The loan is usually intended to be repaid within about a year, though the terms can vary depending on the amount at issue and the relationship between the lender and the borrower. When a borrower does not have property worth charging, taking an unsecured loan may be his only way of obtaining a loan.
Simplicity is another reason to seek an unsecured loan. When only small amounts of money are at issue, it is not usually worth the hassle of transferring property titles and establishing a collateral relationship. A simple contract can often be the best way to proceed, even if there are negative trade-offs.
There is no limit in law on the interest that the lender charges. We have provided for a greater rate of interest if the borrower falls behind with repayments. (That is done very carefully so as to avoid it being treated as a “penalty” - not allowed in New Zealand law.)
The agreement could be whatever you want to put in it, but we have provided a sound and comprehensive proposal containing options. It is supported by drafting notes so that you will know whether you can safely delete some provision. It is most unlikely that you will want to add new provisions, but if you do, it is easy. Our layout and use of plain English also make it very easy to edit by deletion.
When to use this unsecured loan agreement
- The lender and the borrower may be a business or an individual
- Suitable where a company lends to a director or employee
- Suitable for personal loans to family and friends
- Either or both parties may be in New Zealand or abroad
- Flexible for loans of any size and repayment terms of any complexity
The law in this unsecured loan agreement
There is little statutory regulation relating to an agreement of this nature, so you can make, more or less, the deal you choose.
Drawn outside the Credit Contract and Consumer Finance Act 2003, this agreement is not suitable for companies in the business of lending or providing credit to consumers.
Alternatives to this unsecured loan agreement
Net Lawman offers three documents in this set. Each is available in two versions: one for a company borrower and the other set for a human individual or partnership borrower. All can be for any purpose.
The documents are:
- Unsecured loan agreement: person to person; private or business (this agreement)
- Loan agreement: individual borrower; secured on financial assets
- Loan agreement: private borrower; secured on physical assets
- Loan agreement: company; secured by guarantee
- Loan agreement: person to person; secured by guarantee
- Loan agreement: company; secured on financial instruments
- Loan agreement: company borrower; secured on physical assets; guarantor option
We do not provide a document suitable for charging real property because such work is restricted by law to solicitors and licensed conveyancers.
Contents of this unsecured loan agreement
The contents of the agreement include:
- Structure of the loan;
- Alternative draw down arrangements;
- Provisions of information to lender;
- Repayment and interest payment arrangements;
- Method of payment;
- Provision for default situations;
- Borrower's warranties;
- A round up of legal matters which many draftsmen use to create another ten paragraphs. Here they are in one place and in plain English.
This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.
How other customers rated this document
Average customer rating
By Steve Shepherd 23 February 2015
The documents were ear and easy to edit. There were good explanations at the end. Fast service and really helpful. Pride was excellent value. If you want a lower cost approach to setting up good agreements then use these docs.
By Philippa Wadsworth 13 September 2014
A great document. We needed an agreement immediately, between my daughter and I, as we were lending her money for a house deposit. We were able to amend and delete parts to suit quickly and easily to suit in a few minutes and print it off. We saved the original and the amended version.
By Martin Welford 26 June 2014
By I A and MA Drnasin 01 June 2014
This is an ideal document to use for an unsecured loan acknowledgement and to cover basic expectations between both lender and borrower. The original document as purchased was easy to alter and modify the text to suit our situation and omit irrelevant clauses where applicable. The $29 price was very reasonable considering the time saved had I instead started with a blank piece of paper. Recommended easy to use service.
By Ronan Grew 17 July 2016
Haven't really had time yet to review document but it looks good.
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"Yes the document was very useful, easy to read and understand and contained everything I needed. I will definitely refer to your site in the future. "Vicky Gregory
"...Yes very useful. I understand the terminology etc as I've seen a fair few legal docs before. Notes are very helpful. Gives me some base insight without the expense of a solicitor! "John K