Personal Loan Agreement

PERSONAL LOAN AGREEMENT This AGREEMENT is made on [effective_date] BETWEEN [lender_name], son/daughter/wife of [lender_father_name], residing at [lender_address] (hereinafter "the Lender"); AND [borrower_name], son/daughter/wife of [borrower_father_name], residing at [borrower_address] (hereinafter "the Borrower"). WHEREAS the Borrower has requested a friendly loan from the Lender, and the Lender has agreed to advance the same on the terms recorded below, and the parties consider it prudent to record those terms in writing to avoid future misunderstanding. NOW IT IS AGREED AS FOLLOWS: 1. AMOUNT AND ACKNOWLEDGMENT 1.1 The Lender has advanced to the Borrower the sum of Rs. [loan_amount] (Rupees [amount_in_words] only) by way of [disbursement_mode]. 1.2 The Borrower hereby acknowledges receipt of the said sum, and acknowledges the same as a debt due and payable to the Lender. This Agreement constitutes an acknowledgment of debt in writing. 2. PURPOSE The loan has been advanced for the following purpose: [purpose_of_loan]. 3. INTEREST 3.1 The loan shall carry simple interest at the rate of [interest_rate]% per annum on the outstanding amount. 3.2 Where the rate stated above is nil, the loan is interest-free, and the Borrower shall repay only the principal sum. 4. REPAYMENT 4.1 The Borrower shall repay the loan in full, together with interest if any, on or before [repayment_date]. 4.2 Repayment shall be made as follows: [repayment_mode]. 4.3 The Borrower may repay earlier in whole or in part without penalty. 4.4 The Lender shall issue a written receipt for each payment received, and shall return this Agreement marked "discharged" upon full repayment. 5. DEFAULT 5.1 If the Borrower fails to repay by the due date, the entire outstanding amount shall become immediately payable. 5.2 The Borrower shall be liable to pay interest on the overdue amount from the due date until actual payment, and to bear all reasonable costs incurred by the Lender in recovering the amount, including legal costs. 5.3 Where any cheque issued by the Borrower towards repayment is dishonoured, the Lender may proceed under Section 138 of the Negotiable Instruments Act, 1881, in addition to any other remedy. 6. DECLARATIONS 6.1 The Borrower declares that the Borrower is of sound mind, has attained majority, and enters into this Agreement voluntarily and with full understanding of its terms. 6.2 The Borrower declares that the loan is being taken for a lawful purpose. 6.3 The Lender declares that the amount advanced is from lawful and disclosed sources. 7. NO ASSIGNMENT The Borrower's obligations under this Agreement are personal and may not be assigned or transferred. 8. ENTIRE AGREEMENT This Agreement records the entire understanding between the parties in respect of the loan, and supersedes any prior oral arrangement. No variation shall be valid unless in writing and signed by both parties. 9. GOVERNING LAW This Agreement is governed by the laws of India, and the courts having jurisdiction over the Lender's place of residence shall have jurisdiction over any dispute. IN WITNESS WHEREOF the parties have signed this Agreement on the date first written above, in the presence of the witnesses named below. LENDER BORROWER [lender_name] [borrower_name] WITNESSES 1. Name: ______________________ Signature: ______________ Address: ______________ 2. Name: ______________________ Signature: ______________ Address: ______________ PRACTICAL NOTES - Transfer the money by bank transfer, cheque or UPI rather than in cash, and retain the record. A traceable transfer is the single most useful piece of evidence if the loan is later disputed. Note also that Section 269SS of the Income-tax Act, 1961 restricts acceptance of loans of Rs. 20,000 or more in cash. - LIMITATION: under the Limitation Act, 1963 a suit to recover money lent must ordinarily be filed within THREE YEARS of the date it became due. After that the debt is time-barred and cannot be recovered through the courts. A fresh signed acknowledgment of the debt, or a part-payment, made before that period expires starts a new three-year period running. - This Agreement should be executed on stamp paper of the value prescribed by the State concerned. An inadequately stamped instrument may not be admitted in evidence without payment of duty and penalty.