Writing a Simple Personal Loan Repayment Letter (with Sample) Use these sample personal loan repayment letter as a template for your formal repayment letter. Last updated on January 17th, 2019
Personal loans are usually unsecured. This means that the lender cannot take any of the borrower’s assets to repay the loan if the borrower defaults on payments. For this reason, personal loans, whether from a bank, lending institution or a friend are harder to get and usually have a higher interest rate than a secured loan.
When a borrower is making the last payment, he or she may send a personal loan repayment letter. When the lender signs and returns a copy of this letter, it provides the borrower with proof that the whole amount of the loan with interest was paid on time.
When both parties agree on the terms of the loan, a repayment agreement may be created and signed. This agreement details the agreed-upon terms of how the loan will be repaid. It will usually contain the amount being borrowed, the amount of interest being charged by the lender and the length of time the borrower has to repay the debt in full. In some cases, a final date will be given. Terms and conditions of a payment agreement: • The legal name of the borrower and lender • The amount of the personal loan • The date the loan must be fully repaid • When payments are due such as monthly or quarterly • How the payments will be made such as cash or check • Any penalties for defaulting on the terms and conditions • Any margin period for the repayment schedule
A lender may send a repayment letter to the borrower to acknowledge that it received the final payment and the loan is closed. A lender may also send a letter to a borrower asking for repayment of a personal loan when it has not been repaid. There are several ways to ask for the repayment of a personal loan, but each approach should include the amount owed along with interest and agreed repayment date.
When the borrower sends a personal loan repayment letter, he or she should make sure it covers all of the terms and conditions for the loan that are given in the repayment agreement.
• The first step is to write a simple reminder that the repayment date is passed and the loan has not been paid. This letter is usually very friendly and kindly requests that the money be repaid. If it is not possible for the borrower to repay in one lump sum, the lender can agree to extend the monthly payments.
• When a polite request to have the personal loan repaid does not get results, the next step is an appeal collection letter. This letter uses formal language and informs the borrower that he or she is overdue with repaying a personal loan. It reminds them that they have an obligation to repay the loan with interest.
• An ultimatum letter states that the borrower is being given a final chance to repay a personal loan before legal steps are taken. If he or she does not comply, the lender will take action. What action the lender wants to take should be mentioned. For example, they may give the responsibility of collecting the loan to a collection agency or get a legal representative and take the borrower to court.
Below is a sample personal loan repayment letter from the borrower to the lender stating that the loan has been paid in full. The borrower should send two copies of the letter by certified mail with a return requested and keep a copy for his or her records. The lender will sign one of the enclosed copies and return it to the borrower. The borrower can use this signed letter to prove the loan was repaid.
Sample Personal Loan Repayment Letter Name of Borrower Address of Borrower City, State, Zip Code
Name of Lender Company of Lender if applicable Address of Lender City, State, Zip Code
RE: Repayment of personal loan
Dear Name of Lender:
This letter is a formal acknowledgement of the final payment of my personal loan for AMOUNT made on DATE. Enclosed please find a check for AMOUNT that is the last payment due. Kindly note that according to our loan repayment agreement the loan should be paid in full on or before DATE, and that this payment is made on DATE.
Therefore, my loan is paid in full according to the payment agreement terms, and I request that you acknowledge that the loan is fully repaid by signing an enclosed copy of this letter and returning it to me.
If you have any questions, I can be reached at Phone Number or at Email Address any day after 3pm.
Thank you for giving me the personal loan.
Sincerely, Signature of Borrower Printed Name of Borrower List of Enclosures: Check for AMOUNT A copy of this letter to be signed and returned to the borrower
Place for the signature of Lender Printed Name of Lender DATE