Payment (Plan) Agreement Template

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Updated August 24, 2022

A payment agreement (or repayment agreement) outlines an installment plan to repay an outstanding balance that is made over a specified time frame. This is common when an amount is too much to pay for a debtor in a single payment.

Recurring ACH Authorization – Often required as part of a payment agreement to deduct money from a debtor’s account automatically.

By Type (12)


Table of Contents

What is a Payment Plan?

A payment plan is a way for someone to pay for something over a specified length of time. This is often when an amount that is unaffordable to an individual is owed, and the creditor allows payment over the course of months or years.

Interest Rate

Under most payment plans, there is no or little interest as long as payments are made on time. This is a common incentive for the debtor to not default on their payment schedule.

If there is a traditional interest rate, it cannot be more than the State Usury Rate.

How to Set Up a Payment Plan

Setting up a payment plan requires the consent of a creditor and debtor and to define the terms and conditions in an agreement. For outstanding balances, a payment plan is often the “last chance” for the debtor to clear a debt.

Step 1 – Agree to Terms

borrower and lender discussing terms of loan

The debtor and creditor must come to terms with a payment arrangement that benefits both parties. There are two (2) types of payment plans:

  1. Goods or Services – A payment plan created for a customer seeking to purchase goods or services with payments made over a short term (6-18 months). An interest rate is commonly charged.
    • Examples: Motor Vehicle, Cell Phone, etc.
  2. Outstanding Balance – Used to consolidate or make an agreement with a creditor where funds are owed. If there is interest accumulating on the balance, it’s advised the debtor pay 20% of their income. When agreeing to terms the creditor may request the debtor’s last two (2) years of IRS income returns and a copy of their last paycheck.
    • Examples: Past debt, Collections, etc.

Step 2 – Create a Payment Agreement

browser showing eforms payment installment agreement form

After agreeing to the balance owed, the terms of the payment plan should be written in a simple agreement. There is often no security pledged with the incentive to pay by the debtor is either interest-free payments or a discounted total balance.

The payment agreement should include:

  • Creditor’s Name and Address;
  • Debtor’s Name and Address;
  • Acknowledgment of the Balance Owed;
  • Amount Owed;
  • Interest Rate (if any);
  • Repayment Period;
  • Payment Instructions;
  • Late Payment (if any); and
  • the State of Governing Law.

After the signature of the creditor and debtor, the agreement becomes legally valid.

For payment plans consisting of more than $10,000, it’s recommended for both parties to attach a Notary Acknowledgment to the agreement and sign in the presence of a Notary Public.

Step 3 – Begin the Payment Schedule

borrower typing credit card information to set up automatic payment

Use a Credit Card/ACH Authorization Form to obtain the debtor’s payment details. Most creditors will require the debtor to set up automatic payments that will either charge the debtor’s credit card or bank account for each installment period.

Step 4 – Release the Debtor

lender completing a release form on laptop

After the balance owed has been paid-in-full, the debtor will be released from any financial liability. This can be completed through a Release Form and may also be used by the debtor to clear any outstanding balances on their credit report.



I. THE PARTIES. This Payment Installment Agreement (“Agreement”) made this [DATE] (“Effective Date”), is by and between:

Debtor: [DEBTOR’S NAME] with a mailing address of [MAILING ADDRESS] (“Debtor”) and acknowledges that they owe money to:

Creditor: [CREDITOR’S NAME] with a mailing address of [MAILING ADDRESS] (“Creditor”).

The Debtor and Creditor agree to the following repayment plan:

II. BALANCE. At the time of the Effective Date, the Debtor owes the Creditor $[AMOUNT] (“Current Balance”) related to: (check one) 

☐ – an Outstanding Balance.
☐ – Property described as: [DESCRIBE]
☐ – Services described as: [DESCRIBE]
☐ – Other: [OTHER]

III. INTEREST RATE. The Total Amount shall: (check one)

☐ – Bear Interest. The Total Amount shall bear interest at a rate of [#]% compounded: (check one)

☐ – Annually
☐ – Monthly
☐ – Other: [OTHER]

☐ – NOT Bear Interest. There shall be no interest associated with the Total Amount. The Debtor’s only obligation to the Creditor is to repay the principal balance.

IV. DISCOUNTED AMOUNT. In consideration of the Debtor’s faith to repay the Current Balance, the Creditor agrees to: (check one)

☐ – NOT Offer a Discounted Amount. The Debtor is obligated to pay the full Current Balance (“Amount Owed”).

☐ – Offer a Discounted Amount. The Creditor shall offer a discounted balance of $[AMOUNT] (“Amount Owed”) if the Debtor is able to repay the Creditor under the terms of this Agreement. If the Debtor should violate any of the terms of this Agreement, the Debtor shall revert to owing the Creditor the Current Balance in addition to other penalties, fees, and accumulated interest.

V. REPAYMENT PLAN. The Debtor agrees to repay the Total Amount to the Creditor under the following: (check one)

☐ – Weekly Payments. The Debtor agrees to repay the Creditor on the [DAY] of each week until the end date of [DATE].
☐ – Monthly Payments. The Debtor agrees to repay the Creditor on the [DAY] of each month until the end date of [DATE].
☐ – Lump Sum. The Debtor agrees to repay the Creditor, in full, on the date of [DATE].
☐ – Other. [OTHER]

VI. PAYMENT INSTRUCTIONS. The Debtor is required to pay the Creditor under the following payment instructions: [DESCRIBE]

VII. LATE PAYMENT. If the Debtor is late by more than [#] days for any payment due, it shall be considered late. If a payment is late, the Debtor shall be: (check one)

☐ – Charged a Late Fee. The Debtor shall be charged a late fee equal to: [LATE FEE AMOUNT]
☐ – Not Charged a Late Fee. The Debtor shall not be charged a late fee.

VIII. SECURITY. As part of this Agreement, the Debtor agrees to: (check one)

☐ – Pledge Security. The Debtor agrees to secure this Agreement by pledging the following collateral: [DESCRIBE] (“Security”).

In the event the Debtor defaults under this Agreement, the Creditor shall obtain possession of the Collateral: (check one)

☐ – In its entirety and without discount to the amount owed.
☐ – Equal to the amount owed of which a sale may be required.

☐ – Not Pledge Security. This Agreement shall not be secured by any property or asset of the Debtor.

IX. PREPAYMENT. If the Debtor makes a payment prior to the Due Date, there shall be: (check one)

☐ – A Prepayment Penalty. If the Debtor makes a payment prior to the Due Date, then there shall be a prepayment penalty of: (check one)

☐ – Interest payments due as if the prepayments were not made.
☐ – Other: [OTHER]

☐ – No Prepayment Penalty. If the Debtor makes a payment prior to the Due Date, then there shall be no prepayment penalty of any kind.

X. REMEDIES. No delay or omission on part of the holder of this Agreement in exercising any right hereunder shall operate as a waiver of any such right or of any other right of such holder, nor shall any delay, omission, or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The rights and remedies of the Creditor shall be cumulative and may be pursued singly, successively, or together, at the sole discretion of the Creditor.

XI. ACCELERATION. The Creditor shall have the right to declare the Total Amount to be immediately due and payable, including interest owed, if any of the events are to occur:

  1. Late Payment. If any payment is late that is due under the Payment Schedule of more than 15 days;
  2. Default. If the Debtor should default on any of the conditions of this Agreement; or
  3. Security. If assets or property that are pledged as Security as part of this Agreement are transferred or sold.

XII. SUBORDINATION. The Debtor’s obligations under this Agreement are subordinated to all indebtedness, if any, of the Debtor, to any unrelated third-party creditor to the extent such indebtedness is outstanding on the date of this Agreement and such subordination is required under the loan documents providing for such indebtedness.

XIII. WAIVERS BY DEBTOR. All parties to this Agreement, including the Debtor and any sureties, endorsers, and guarantors, hereby waive protest, presentment, a notice of dishonor, and a notice of acceleration of maturity and agree to continue to remain bound for the payment of principal, interest and all other sums due under this Agreement notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Agreement or by way of any extension or extensions of time for the payment of principal and interest; and all such parties waive all and every kind of notice of such change or changes and agree that the same may be made without notice or consent of any of them.

XIV. DISPUTES. In the event any payment under this Agreement is not paid when due, the Debtor agrees to pay, in addition to the principal and interest hereunder, reasonable attorney’s fees not exceeding a sum equal to the maximum usury rate in the state of Governing Law of the then outstanding balance owing on the Borrowed Amount, plus all other reasonable expenses incurred by Creditor in exercising any of its rights and remedies upon default.

XV. SEVERABILITY. If any provision of this Agreement or the application thereof shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entities, or circumstances shall be affected, thereby, but instead shall be enforced to the maximum extent permitted by law.

XVI. GOVERNING LAW. This Agreement shall be construed and governed by the laws located in the state of [GOVERNING LAW] (“Governing Law”).

XVII. SUCCESSORS. All of the foregoing is the promise of Debtor and shall bind Debtor and Debtor’s successors, heirs, and assigns; provided, however, that Creditor may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the holder of this Agreement.

XVIII. ENTIRE AGREEMENT. This Agreement contains all the terms agreed to by the parties relating to its subject matter, including any attachments or addendums. This Agreement replaces all previous discussions, understandings, and oral agreements. The Debtor and Creditor agree to the terms and conditions and shall be bound until the Borrowed Amount is repaid in full.

IN WITNESS WHEREOF, Debtor and Creditor have executed this Agreement as of the day and year first above written.

Debtor’s Signature: _____________________ Date: _____________
Print Name: _____________________

Creditor’s Name: _____________________ Date: _____________
Print Name: _____________________


The Guarantor, known as [GUARANTOR’S NAME], agrees to be liable and pay the Borrowed Amount, including principal and interest, in the event of the Debtor’s default. The Guarantor agrees to be personally liable under the terms and obligations of the Debtor in this Agreement.

Guarantor’s Signature: _____________________ Date: _____________
Print Name: _____________________