A payment agreement plan will start with the date that the money was granted from the payer to the payee, the amount of the loan, and the date repayment in total is due. There will be spaces for the printed names, signatures, and the dates of the signatures of both parties.
There may also be an agreement to a lateness penalty to be paid by the debtor for each day, week or month after the due date for which there is still outstanding debt. This penalty is generally keyed to the amount, or percentage of the debt that hasn’t been met by the agreed on date.
The parties may also agree that the debt should be retired in stages, with a partial payment to be made every week, month or at any other time period to be specified. This sort of agreement will still have the original amount granted, and spaces for the printed names and signatures as before.
Three columns, Date, Amount To Be Paid, and Balance Due will dominate the rest of this Payment Agreement Plan. On the date specified, a payment must be made, and the amount in the Balance Due column will reflect the reduced amount of money now owed by the debtor to the loan grantor. There is one line for each payment to be made, until, after the final payment, the amount in the Balance Due column must equal zero.
If you are granted a loan over a longer period of time in a more formal setting, interest on the amount of money owed must be accounted for. In addition, in the case of a mortgage, this interest may be, and usually is, deductible in some form on both your federal and state income taxes.
How to Write
As always, this sort of Payment Agreement Plan begins with identification of both parties and states the initial amount loaned as well as the date by which the debt must be retired. Here, the interest rate at which the loan is granted must also be stated.
In this case, six columns take up the body of the Payment Agreement Plan; these are Month, Balance, Payment, Principal Paid, Interest Paid and Total Interest Paid.
Assuming that you are required to make a payment once a month, the entry in the “Month” column is either the month and year of the payment or whole numbers starting with one in each line. Balance is the amount due before the payment specified in the line has been paid. Payment is the amount paid, which is generally the same amount each month. The dollar amounts in Principal Paid and the Interest Paid add up to the amount in Payment, and the division thereof is calculated by formula.
The reason for the separate column for Total Interest Paid is that, as stated, this is relevant for tax purposes. It also obviates the need to break up the form at the end of each tax year to include a summary row with the amount of interest paid in that tax year.