How to Write a Simple Promise to Pay Letter (with Samples)
Use these sample promise-to-pay letters as templates for your formal agreement.
Last updated on November 24, 2023
When one party agrees to provide goods, services or money to another party the promise to pay letter is an indispensable component of the transaction. This document clearly and legally defines the agreement between the parties and may be used as evidence in a lawsuit if one of the parties fails to uphold their side of the bargain.
These documents don't have to be long or complicated. However, it's essential that they include a few basic elements so that the terms can be understood and interpreted by anyone who reads them.
Installment Agreement
Sometimes called a promissory note or an installment agreement, a promise to pay 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 don't have to be long or complicated. However, it's essential that they include a few basic elements so that the terms can be understood and interpreted by anyone who reads them.
Installment Agreement
Sometimes called a promissory note or an installment agreement, a promise to pay 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 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.
Payment Agreement
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.
Payment Agreement
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.
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.
Strongly Recommended
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.
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.
Written Agreement
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 promise to pay letter. The following example is a template that can be easily customized to suit a variety of transactions
Strongly Recommended
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.
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.
Written Agreement
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 promise to pay letter. The following example is a template that can be easily customized to suit a variety of transactions
Sample 1 - Promise to Pay 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.
Signed:
Signature of Payee with Date
Signature of Promisor with Date
Signature of Witness or Notary with Date
Sample 2 - Promise to Pay Letter
PAYMENT AGREEMENT
FULL NAME OF PAYEE
FULL NAME OF PROMISOR
DATE OF LOAN
DATE REPAYMENT IS DUE
TOTAL AMOUNT DUE
TERMS OF AGREEMENT:
I, FULL NAME, borrowed $500 from FULL NAME on DATE. We both agreed that the money would be repaid in a series of scheduled payments.
I, FULL NAME, will repay the loan with a personal check in a series of $100 payments every month for five months starting DATE. The payments will be given to FULL NAME on the first of every month beginning with June 1st with the last payment being made on October 1st.
I, FULL NAME, will pay a $5 per day late charge for any payments that are not on time as agreed until the loan is paid in full.
The payee and the promisor agree to the payment agreement terms listed above.
Signed:
Signature of Promisor DATE
Printed full name and address, email address, phone number of promisor
Signature of Payee DATE
Printed full name and address, email address, phone number of payee
Signature of Witness(s) DATE
Printed full name and address, email address, phone number of witness(s)
By Andre Bradley
Frequently Asked Questions (FAQs)
- Q: What is a Promise to Pay Letter?
Answer: A Promise to Pay Letter is a written agreement where a debtor agrees to pay a certain amount of money owed to a creditor by a specified date. This letter typically outlines the amount owed, the agreed payment plan, or the lump sum to be paid, and the deadline for the payment. It serves as a formal commitment to repay a debt and can be used as legal evidence if the agreement is breached. - Q: Is a Promise to Pay Letter legally binding?
Answer: Yes, a Promise to Pay Letter can be legally binding if it contains all the essential elements of a contract, such as an offer, acceptance, consideration, mutual intent to be bound, and competent parties. However, the enforceability might vary depending on the jurisdiction and the specific terms of the agreement. It's advisable to have the document reviewed by a legal professional to ensure its validity. - Q: How do I write a Promise to Pay Letter?
Answer: To write an effective Promise to Pay Letter, include the following elements: the creditor and debtor's full names and contact information, the total amount of debt, payment terms (such as the amount, frequency, and method of payments), due date for the final payment, any interest or fees applicable, signatures of both parties, and date of the agreement. Be clear and precise in the terms to avoid any misunderstandings. - Q: Can a Promise to Pay Letter be modified?
Answer: Yes, a Promise to Pay Letter can be modified, but any changes should be agreed upon by both the creditor and the debtor. It's best to put these modifications in writing and have both parties sign the amended agreement. This ensures that the changes are legally binding and reduces the risk of future disputes. - Q: What happens if the debtor fails to comply with the Promise to Pay Letter?
Answer: If the debtor fails to comply with the terms of the Promise to Pay Letter, the creditor has the right to take legal action to recover the owed amount. This might include filing a lawsuit, seeking a judgment against the debtor, or using other legal means to enforce the agreement. The specific course of action will depend on the terms of the agreement and the laws of the jurisdiction. - Q: Should a Promise to Pay Letter be notarized?
Answer: While not always necessary, getting a Promise to Pay Letter notarized can add an extra layer of authenticity and help in proving the validity of the document in court, if needed. Notarization ensures that the signatures on the letter are legitimate and that the parties entered into the agreement willingly and without duress. - Q: Does a Promise to Pay Letter affect credit score?
Answer: A Promise to Pay Letter in itself does not directly affect a credit score. However, if the letter is part of a debt settlement or repayment plan, how the creditor reports the payment to credit bureaus could impact the debtor's credit score. If the debt is paid as agreed, it can positively influence the credit score; if not, it can have a negative impact.