Letter of Agreement for Payment of Debt Template [Nigeria]

Updated June 26, 2023

During the course of a business transaction, a debt is incurred by a business owner to another party without entering into a formal loan agreement. This document can be used by the parties to vary the terms of the debt payment. 

A Letter of Agreement for Payment of Debt is used by a business owner to propose the terms of the repayment of the debt. This letter states the intent of one of the parties with respect to the repayment of the debt and is forwarded to the other party to either consent to these terms or vary the proposed terms. In summary, a business owner can use this letter to negotiate the terms of a debt payment or settlement. The main focus of this letter is to highlight the terms of a debt settlement or payment.

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How to use this

This letter is basically used to negotiate the terms of debt payment until the parties to the transactions reach a consensus. In preparing this letter the following terms has to be clearly stated:

  • Proposed Terms of Repayment
  • Loan Amount
  • Installment Sum
  • Payment Date of Installment Sum
  • Interest Rate (Where Applicable)
  • Any other term such as Dispute Resolution term which the parties may deem necessary.

Moreover, there are minimum differences between this letter and an Agreement Letter for Borrowing Money.  In an Agreement Letter for Borrowing Money, the terms of repayment of the loan may or may not be outlined in the letter as the focus is mostly on the intentions of the party to enter into a loan agreement. However, a Letter of Agreement for Payment of Debt focuses on the terms of repayment or settlement of the debt rather than the circumstances in which the debt was incurred by the business owner.

Other names for

  • Debt Settlement Agreement
  • Debt Payment Terms.
  • Agreement for Payment of Debt Letter

Applicable Laws in Nigeria

  • Companies and Allied Matters Act, 2020
  • Contract Law of a State, e.g. Law Reforms (Contract law), Lagos State, 2015
  • Company Income Tax Act
  • Banking and Other Financial Institution Act (Applicable where the Lender is a Bank).
  • Money Lending Law of a State where applicable
  • Insurance Act.

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