Writing a Simple Payment Agreement Letter [Free Samples]

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Sometimes called a promissory note or an installment agreement, a payment agreement letter defines a transaction between at least two parties. 

Such agreements are common between companies that are agreeing to exchange money for goods or services. 

These documents also may be utilized by insurance companies who ask customers to agree to certain payment terms. 

Payment Agreements

Payment agreements may also be arranged between private parties. Friends, family members and colleagues may all use these documents to help ensure fair dealings when loaning or accepting money.

The Payment Agreement protects each party in various ways. It clearly defines what the transaction is, such as a loan between friends. It identifies the parties and how much money is involved.

It further delineates how and when the money will be paid back. For instance, the party loaning the money may require that the borrower pay them back with a cashier’s check while prohibiting the use of a personal check.

Interest Rates

Moreover, the agreement may define what sort of penalty is involved if the money is not paid back as agreed upon. Interest rates are not always a part of these agreements. 

If the borrower will be required to pay interest, then this should be defined in the agreement, including how the interest will be calculated.

It is strongly recommended that the agreement be notarized or at least witnessed and signed by an impartial third party. 

This makes the agreement easier to defend in court, and makes it less likely that the document will be tampered with later. Each party to the agreement should receive a fully-executed copy for their files. 

Sample Well-Defined Payment Plan?

This level of detail is necessary for the protection of both parties because it makes it far less likely that disputes will arise. 

The promisor, the party borrowing the money, receives the assurance that the payee, the party loaning the money, will not claim that the loan was actually for a much larger amount.

Moreover, the written agreement makes it possible for the payee to prove that the promisor had a well-defined payment plan and that they did not comply with the schedule. 

Accordingly, it is less likely that litigation will arise from a dispute, and if litigation does occur, then the agreement may be what the court relies upon to make a decision.

A single page document is all that is required to make a binding Payment Agreement Letter. The following examples are templates that can be easily customized to suit a variety of transactions.

Sample 1 - Simple Payment Agreement Letter

Full, Legal Name Of Payee
Full, Legal Name Of Promisor
Loan Date
Total Amount Of Loan
Final Due Date For Repayment

Agreement Terms:

I, Payee Name (“Payee”), borrowed $1,000 from Promisor Name (“Promisor”) on Loan Date. By signing this agreement both Payee and Promisor acknowledge that Payee will pay back Promisor using the following payment schedule.

Payee agrees to repay Promisor with a personal check for $100 on the first of each month for 10 months beginning with January 1, 20__. 

The last payment will be made October 1, 20__, at which time the loan will be fully repaid.

Payee further agrees to pay a $35 per week late charge for every week that payment is delayed after the first of the month.

This $35 late charge may be prorated as a $5 per day charge for each day that the payment is late for segments of time shorter than seven days.

Both Payee and Promisor agree to the payment agreement defined above.


Signature of Payee with Date

Signature of Promisor with Date

Signature of Witness or Notary with Date

Sample 2 - Simple Payment Agreement Letter

This is an agreement entered into by the Client, [Name and Address of Client], and the service Provider, [Name and Address of Provider] that is valid on this date, [DATE].

The Client hereby appoints the Provider for the services described under Designated Services. The Provider agrees to deliver the services and be paid according to the description under Scheduled Payment.

Designated Services

The Provider will take the Client’s two dogs, both beagles, for a 45 minute walk every day. The dogs will be on leashes and may be taken to the local park Name of Park.

The provider will go to the Client’s house to get the dogs at or about 11:00 am and return them to the house after 45 minutes. If either dog has a bowel movement, the Provider will clean the area in the appropriate way.

If the Provider is not able to perform the above mentioned duties, the Provider will inform the Client at least 24 hours in advance unless the reason is an emergency.

Scheduled Payment

The Client will pay the Provider thirty dollars $30 at the time the Provider brings the dogs back to the house after the walk. At that time, the Provider will sign a receipt for the payment.

If the Client fails to pay on time, the Client will add five dollars $5 to the salary the next time the Provider walks the dogs. If the Provider fails to walk the dogs, no payment will be given.

Applicable Laws

This agreement is governed by the laws of the County of [COUNTY] in the state of [STATE] and any applicable federal laws. This agreement can be terminated by either the Client or Provider one week, seven days, in advance of the termination date.

The authorized agents the Client and Provider affix their signature to the terms of the above agreement.

[Signature of Client DATE] [Printed Name of Client]

[Signature of Provider DATE] [Printed Name of Provider]

Frequently Asked Questions (FAQ's)

1. What should be included in a payment agreement letter?

Answer: A payment agreement letter should include the details of the debt, the terms of the payment agreement including the amount, payment schedule, and any late fees, the consequences of non-payment, and the contact information of both parties.

2. How can I make a payment agreement letter legally binding?

Answer: To make a payment agreement letter legally binding, it should be signed by both parties and include specific language that confirms the agreement is legally binding. It’s also a good idea to have the letter notarized and have the document being witnessed by a third party.

3. What should I do if the other party does not abide by the terms of the payment agreement?

Answer: If the other party does not abide by the terms of the payment agreement, you can reach out to them to remind them of their obligations, and if necessary, take legal action to enforce the agreement.

4. How can I create a payment agreement letter that is fair to both parties?

Answer: To create a payment agreement letter that is fair to both parties, it’s important to be clear and specific about the terms of the agreement, take into account the financial situation of both parties and be reasonable with the payment schedule, and include a clear and easy way for the other party to make payments.

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