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The Personal Loan Contract Between Friends is essential in situations where individuals wish to formalize a lending arrangement with someone they know personally. This document has become increasingly important as private lending grows more common for various purposes such as small business startups, education expenses, or personal projects. While the parties may trust each other due to their existing relationship, having a written agreement helps prevent misunderstandings and protects both parties' interests. The contract is designed to comply with U.S. federal and state lending regulations, including usury laws and truth-in-lending requirements. It provides clear terms for loan amount, interest, repayment schedule, and default procedures while maintaining language that is accessible to non-legal professionals. This type of agreement is particularly relevant in situations where traditional bank loans may not be suitable or available.

1. Parties: Identifies the lender and borrower with their full legal names and addresses

2. Background: Brief context explaining the purpose of the loan and relationship between parties

3. Definitions: Defines key terms used throughout the agreement

4. Loan Amount and Purpose: Specifies the principal amount being borrowed and its intended use

5. Interest Rate: States the agreed interest rate and confirms it complies with applicable usury laws

6. Repayment Terms: Details the payment schedule, including amount, frequency, and duration of payments

7. Method of Payment: Specifies acceptable payment methods and payment processing details

8. Late Payments: Outlines consequences and any fees for late or missed payments

9. Default: Defines what constitutes default and the consequences thereof

10. Representations and Warranties: Basic statements about the parties' capacity to enter into the agreement

11. Governing Law: Specifies which state's laws govern the agreement

12. Signatures: Space for both parties to sign and date the agreement