Guide to Personal Loan Agreements

By Jamie Cattanach · May 05, 2022 · 7 minute read

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Guide to Personal Loan Agreements

Getting a personal loan? It’s not as simple as walking into a bank and asking for a check — there’s some paperwork involved.

Your personal loan agreement is the document that contains everything you need to know about the deal you’re making with your lender, including your rights and responsibilities as well as theirs. It’s a fairly long and complex form, but breaking it down can make it easier to understand.

Let’s take a closer look at personal loan agreements.

What Is a Private Personal Loan Agreement?

A personal loan agreement, as mentioned above, is a document that details exactly what is being agreed to on both sides of a personal loan — lender and borrower. At the very least, it will state how much money is being loaned and the terms and conditions of the borrower’s repayment responsibilities.

But what is a personal loan that is not with a traditional lender? Private lenders can be individuals or organizations that make loans to individuals, sometimes without the qualification requirements of traditional lending institutions. A private personal loan agreement, specifically, is drafted as part of a private personal loan — one made between a private lender and a borrower.

Any personal loan agreement is a legally binding document, so it’s important to understand it in full before you apply your signature.

Why Is a Loan Agreement Needed?

A personal loan agreement is essentially a protective document. It protects both the lender and the borrower by laying out, in clear terms, exactly what is being agreed to. If either party fails to uphold the agreement, action can be taken — such as the lender seizing any assets offered as collateral or sending the account to collections — both of which, obviously, would be bad for the borrower.

But the document works both ways. Lenders, too, are subject to lender liability and can be taken to court if they fail to uphold their end of the loan agreement. Although these cases are far less common than borrower default, the loan agreement is a document that can be used for the borrower’s protection as well.

Does a Personal Loan Agreement Need to Be Notarized?

Personal loans are a type of contract, and contracts do not need to be notarized to be legally binding. All it needs is your signature — so once again, be sure to read all the fine print in detail before you uncap that pen.

What Should Be In a Personal Loan Agreement Form?

While the specifics of each personal loan agreement will vary, all loan agreements usually have a few basic items in common — items that must be there in order to make the loan agreement comprehensive.

Here are some details that are important to have in your personal loan agreement form.


Your legal name should appear on the document to show that the money is being loaned to you and no one else.


Your address and other contact information may also be in the loan agreement.

Amount Borrowed

The amount of money being borrowed is an important inclusion in a personal loan agreement — in part because it ensures the lender can’t ask you for anything beyond the borrowed principal (plus interest, which will also be listed).

Repayment Dates

The loan agreement should list payments will be expected each month and the expected date of the conclusion of the loan term.

Annual Percentage Rate (APR) and Interest Rate

The rate for the personal loan will also be on the personal loan agreement, likely expressed as an APR, which shows what percentage of the principal you’ll end up paying back in the course of one year including interest and any additional fees that may be packaged into the loan.

Your interest rate will vary based on your credit score and other financial factors. You’ll likely be able to qualify, if you have decent credit, for a personal loan — but also generally speaking — the higher your score, the lower your rate.

Recommended: APR vs. Interest Rate

Payment Method

The loan agreement may list which types of payment are acceptable, such as check, bank transfer, or credit card.

Payment Conditions

The contract should also list specific repayment conditions, including when payment is due and whether or not additional principal can be applied without penalty.

Dispute Management

A complete personal loan agreement should include details on how any disputes will be handled between the parties involved.

Change Loan Term Options

Some personal loan agreements may include the option to change your loan’s term (the period over which the loan is repaid).

Law Choice

Contracts in the United States should stipulate which state’s laws will be used to govern and interpret the agreement if borrowers live in a different state than the lender is headquartered.


Severability is a clause that states that even if one part of a contract is found to be unenforceable or otherwise rendered null and void, the remainder of the agreement will still hold.


Penalties associated with the personal loan, such as any late fees that may be assessed, at what point the loan will go into arrears or default, or other scenarios, should be listed in the contract as well.


Finally, the loan agreement must be signed by the borrower and the lender in order to be made legally binding.

Other Personal Loan Documents

Along with the signed personal loan agreement, there are other typical personal loan requirements, including the following.

Proof of Identity

Your driver’s license or some equivalent form of photo ID will likely be necessary in order to verify your identity.

Income Verification

Lenders will consider your income when qualifying you for a loan — after all, they have good reason to be interested in whether or not you’ll be able to repay the debt. Along with asking you to list your annual income, verifying documents such as tax returns may also be required.

Proof of Address

In order to prove your residence, and therefore eligibility for a loan, you may need to prove your address with utility statements, bank statements, or other official documents.

Getting a Personal Loan

Taking out a personal loan is a big financial responsibility, but it can also be a smart money move if you need to handle large, unexpected expenses at the last minute, or consolidate existing debt. For someone who has poor credit, a small personal loan responsibly managed can be one way to bolster their credit score.

Just remember that all loans come at a price — interest charged — and considering the total amount you’ll pay back to the lender over time is important in order to have a full understanding of the cost of the loan.

For example, if you take out a $10,000 personal loan at a 7% interest rate to be repaid over a term of five years, you’ll pay back a total of $11,880.72, or an additional $1,880.72 in interest. That’s not including any origination fees, late fees, or prepayment penalties a lender might charge.

The Takeaway

If you’re considering a personal loan, reading the loan agreement in depth is a good way to understand for sure what you’re agreeing to.

And if you’re looking for a personal loan with upfront terms, you might want to check out SoFi Personal Loans, which have competitive, fixed rates, and no fees required. Checking your rate won’t impact your credit score* — so why not take a peek today?

Learn more about personal loans from SoFi


Does a personal loan agreement need to be notarized?

No, a personal loan agreement does not need to be notarized to be legally binding — it simply needs to be signed by each party to the agreement.

What is a private personal loan agreement?

A private personal loan agreement is the binding legal contract between a borrower and a lender during a private personal loan.

Why do you need a loan agreement?

The personal loan agreement serves to outline the specific terms of the loan and protect both parties in case either fails to uphold the agreement.

*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Photo credit: iStock/Chaay_Tee

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