This Draft Loan Agreement is a simple and illustrative format for an interest-free personal loan between two individuals. It may be used where money is advanced based on mutual trust, such as between friends, relatives, or acquaintances. The draft records the basic terms relating to the loan amount, duration, repayment, and understanding between the lender and the borrower. Parties are advised to modify the draft as per their specific requirements and to seek legal advice before execution.
DRAFT LOAN AGREEMENT
(Interest-Free Loan with Security Cheque & Arbitration)
This Agreement is made and executed at __________ on this ____ day of __________, ______
BETWEEN
__________________________,
son/daughter of __________________, resident of __________________,
hereinafter referred to as “the Lender”
AND
__________________________,
son/daughter of __________________, resident of __________________,
hereinafter referred to as “the Borrower”
(The expressions “Lender” and “Borrower” shall include their respective heirs, legal representatives, administrators, and permitted assigns.)
WHEREAS
- The Borrower has approached the Lender for an interest-free loan of Rs. __________/- (Rupees __________________ only);
- The Lender has agreed to grant the said loan for a period of ____ years on mutual trust;
- The parties wish to reduce the terms of the loan into writing.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
- Loan Amount
The Lender has advanced a sum of Rs. __________/- (Rupees __________________ only) to the Borrower, receipt whereof is hereby acknowledged.
- Purpose
The loan shall be utilised by the Borrower for personal / residential purposes.
- Tenure
The loan shall be for ____ years commencing from //_____ and ending on //_____.
- Repayment
The Borrower undertakes to repay the entire loan amount within the aforesaid period, either in instalments or lump sum, without interest.
- Personal Undertaking
The Borrower gives an unconditional personal undertaking to repay the loan within the stipulated period.
SECURITY & CHEQUE CLAUSE (NI ACT COMPLIANCE)
- Security Cheque
In discharge of the above liability, the Borrower has issued the following cheque(s) in favour of the Lender:
Cheque No. __________
Date: __________
Amount: Rs. __________
Drawn on: __________________ Bank
The Borrower admits that the said cheque(s) have been issued towards legally enforceable debt/liability.
- Dishonour of Cheque
In the event of dishonour of the said cheque(s), the Borrower shall be liable for action under Section 138 of the Negotiable Instruments Act, 1881, in addition to civil remedies available to the Lender.
DEFAULT & REMEDIES
- Event of Default
The Borrower shall be deemed in default if:
- fails to repay the loan within the agreed period; or
- the security cheque is dishonoured; or
- breaches any term of this Agreement.
- Legal Remedies
Upon default, the Lender shall be entitled to:
- demand immediate repayment of the entire outstanding amount;
- initiate civil and/or criminal proceedings, including under NI Act;
- recover legal expenses and costs from the Borrower.
ARBITRATION & JURISDICTION
- Arbitration
Any dispute arising out of or in connection with this Agreement shall be referred to sole arbitration, to be conducted in accordance with the Arbitration and Conciliation Act, 1996.
Seat and venue of arbitration shall be __________.
- Governing Law & Jurisdiction
This Agreement shall be governed by the laws of India, and subject to arbitration, courts at __________ shall have jurisdiction.
MISCELLANEOUS
- Stamp Duty
This Agreement shall be executed on appropriate non-judicial stamp paper, and stamp duty shall be borne by the Borrower.
- Entire Agreement
This Agreement constitutes the entire understanding between the parties.
- Voluntary Execution
The parties affirm that this Agreement has been executed voluntarily, without coercion or undue influence.
IN WITNESS WHEREOF
The parties have signed this Agreement on the day and year first written above.
LENDER
Signature: __________
Name: __________
BORROWER
Signature: __________
Name: __________
Witnesses:
- Name & Signature
- Name & Signature
Disclaimer: This format is for reference purposes. Parties should ensure compliance with State stamp laws and factual correctness before execution.
