16+ FREE Payment Agreement Templates & Examples

Payment Agreement Form

When you lend someone money, it can be tempting to leave things to chance when they promise to ‘pay you back.’ This is especially true if the borrower is a close friend, relative, coworker, or customer. However, it is advisable to prepare and sign a payment agreement whenever you borrow or lend money as proof of the loan terms and conditions. In this post, we review the importance of this document and tell you how you can prepare it.

What Is a Payment Agreement?

A payment agreement is a formal and legal contract that outlines the payment terms and conditions agreed upon by a creditor and debtor. It outlines the mode of payment, e.g., full payment or installments, and can be used for personal and commercial transactions.

What Is a Payment Agreement Template?

A payment agreement template is a formatted document used to record the terms of a lending agreement. It identifies the borrowed amount, payment plan, and other clauses for confidentiality and termination. If you regularly lend people or businesses money, you should create a reusable template.

Why Is a Payment Agreement Important?

Borrowing and lending money is one of the most crucial and common financial transactions. While you may be tempted to execute these dealings with a verbal agreement, you need a safety net against defaulters, which in this case is a payment agreement.

A payment agreement reduces the risk of a debtor not repaying your money. It holds both of you accountable to the payment plan should a dispute arise, necessitating legal action against the debtor. On the other hand, a debtor can use the document to challenge contract breaches by the creditor.

Essential Elements of a Payment Agreement Template

Generally, a payment agreement includes several clauses, terms, and conditions designed to uphold a set payment plan. These details are arranged into the following key elements:

  • Debt Amount – This is the amount the creditor is lending the debtor. It sometimes covers the reason for borrowing, e.g., paying tuition fees, starting a business, etc.
  • Payment Plan – The agreement must set out the payment method, frequency, and timelines, e.g., monthly installments of $300 paid on the 3rd of every month.
  • Amendments – This clause ensures that any changes to the original agreement will be agreed to and signed in by both parties.
  • Defaults – This clause allows the creditor to declare the outstanding amount and interest as due should the debtor fail to meet the payment terms.
  • Signatures – The debtor and creditor signatures make the payment agreement legally binding.

How to Setup a Payment Plan

A payment plan covers the terms, duration, and frequency of payment for borrowed money. If a payment is overdue, this agreement serves as the debtor’s final chance to clear the debt. Here is a step-by-step guide for preparing the plan:

Step 1: Set the Terms

The debtor and creditor must agree on a payment agreement that benefits them both. They can choose from one of two payment plans, which are:

  1. Goods or Services – For customers looking to pay for goods or services within a period of 6 to 18 months (short term) with interest.
  2. Outstanding Balance – For a debtor that owes a creditor an outstanding balance. If the balance is attracting interest, it is best that the debtor commit 20 percent of their income to the plan.

Step 2: Write the Payment Agreement

With the payment terms set, the creditor should put them in writing in a simple payment agreement. This contract will be considered legally binding upon both parties signing it.

Step 3: Start the Payments

After signing the agreement, the creditor can set up a payment channel that either charge the debtor’s bank account or credit card every installment period.

Step 4: Close the Debt

When the debtor completes the payments, the creditor should release them from liability through a signed Release Form. The debtor can use this document to clear negative items from their credit report.

Payment Agreement Template


This payment agreement is entered into on {effective date} by {creditor’s name} of {mailing address}, hereinafter called the Creditor and {debtor’s name} of {mailing address} hereinafter called the Debtor, and collectively as the Parties. The parties agree:

That the Debtor owes and is to pay the Creditor an amount of {dollar amount} to be paid in {full/monthly instalments} of {amount} every {date}.

That they will follow the payment plan set out in this agreement, which includes the following terms:

  • DEFAULT: If the Debtor fails to follow the payment plan, the Creditor can declare the outstanding amount and interest as immediately due and payable.
  • SEVERABILITY: {Add Severability Clause}
  • DISPUTE RESOLUTION: All disputes arising in connection with the Agreement shall be subject to the laws of {State Name} and submitted to {resolution method, e.g., Arbitration/Mediation}.
  • AMENDMENTS: The Parties will put all amendments to the Agreement in writing, and both sign the document to execute the changes.
  • ENTIRE AGREEMENT: This agreement is absolute, contains all the understandings between the Parties, and supersedes all prior contracts.
  • GOVERNING LAW: This agreement is prepared under and governed by the laws of {State Name}


The Parties agree to the terms set in this Agreement and demonstrate this through their signatures as presented below:

Debtor: {Debtor’s Name}, {Debtor’s Signature}, {Signature Date}

Creditor: {Creditor’s Name}, {Creditor’s Signature}, {Signature Date}

Witness: (If any) {Witness’s Name}, {Witness’s Signature}, {Signature Date}

Payment Agreement Templates and Examples

Payment Agreement Contract #01

Payment Agreement Contract #02

Payment Agreement Contract #03

Payment Agreement Contract #04

Payment Agreement Contract

Credit Card Payment Agreement Form



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Payment Agreement Form





    Frequently Asked Questions

    What is a payment plan?

    A payment plan is a set formula through which a debtor is expected to pay an outstanding amount over a given period of time. It is designed to make payments easier for the debtor by allowing installments.

    When to use a Payment Agreement?

    A payment agreement will come in handy when:

    • You wish to borrow money
    • You wish to lend someone money
    • You are creating a table of amortization
    • You are preparing a payment plan

    How can I terminate a payment contract?

    A payment contract is like a legal agreement and can be terminated when the debtor completes their payments, either party breaches the terms, or both parties mutually agree to terminate it.

    Does a payment agreement contract need to be witnessed?

    It is not a legal requirement but is advisable to have a witness or a notary (significant amounts) when signing a payment agreement.

    Is a payment agreement necessary?

    Yes, a payment agreement serves as proof that both parties agreed to the payment terms. It gives either party legal standing to take action should the terms be breached.


    While not legally required, a payment agreement is a crucial document that protects the rights of a creditor and debtor. It ensures they both stick to the agreed-upon terms and gives the creditor legal grounds to file a lawsuit against the debtor for defaulting. On the other hand, it also protects the debtor from unscrupulous collection tactics.