Section 1 of the Small Loans portal, instantiated from the contract model. Draft clauses, intended to be reviewed and validated by lawyers. Not legal advice.

Small loan agreement: draft clauses with commentary

A. Preamble clauses

P1. Parties and relationship

Draft: This agreement is entered into between [Lender, name] and [Borrower, name], who are [relationship: sister and brother, friends, neighbours, cousins]. Both state that they enter this agreement to protect their relationship as much as the money.

Why it makes sense: naming the relationship in the contract is unusual and deliberate: it reminds both parties, at every reading, what is really at stake.
Advantages: sets the tone; a mediator later understands immediately that this is not a commercial loan.
Risks: none significant; the clause is declaratory.
Limits: stating the relationship creates no legal privilege; the obligations below do the work.

P2. Recitals

Draft: Whereas the Borrower needs [amount] for [purpose, optional], and whereas the Lender is willing to lend it, both parties prefer clear written terms to an informal promise, so that reminders stay easy and the relationship stays whole.

P3. Definitions

Draft: "Loan amount": the sum stated in clause S1. "Schedule": the repayment table in Annex 1. "Support group": the persons listed in Annex 2, if used. "Guarantor": the person identified in the guarantor addendum, if used. "Pledge": the object or service described in Annex 3, if used.

P4. Purpose

Draft: The purpose of this agreement is to record a small loan between close persons and the way it will be repaid, including what happens, calmly and in agreed steps, if repayment becomes difficult.

B. Substance clauses

S1. Amount and handover

Draft: The Lender lends the Borrower [amount, currency]. Handover on [date] by [cash / transfer]. The Borrower confirms receipt through the platform; the confirmation serves as receipt.

Why it makes sense: the receipt kills the most common dispute of all: "I never got that much."
Advantages: one dated confirmation, no arguing about memories.
Risks: cash without confirmation leaves the Lender unprotected; the clause only works if the confirmation step happens.
Limits: proves handover, not the Borrower's ability to repay.

S2. Repayment schedule

Draft: The Borrower repays according to the schedule in Annex 1: [n] installments of [amount] on [dates], by [method]. Early repayment is allowed at any time without penalty.

Why it makes sense: several small dates beat one big one; each kept installment rebuilds confidence.
Advantages: early repayment without penalty removes any incentive to drag things out.
Risks: schedules built on optimism fail; a realistic small installment beats an ambitious one.
Limits: a schedule does not create money; if the Borrower's situation collapses, renegotiation (S7) is the real safety net.

S3. Interest and gestures

Draft: This loan bears no interest. Optionally, the parties may agree on a modest thank-you gesture [meal, service, symbolic amount], stated here: [gesture or "none"].

Why it makes sense: between close persons, zero interest is the norm and the healthiest default; under Swiss law a private loan bears interest only if agreed (see the legal references).
Advantages: the explicit "no interest" line prevents later claims either way; the optional gesture gives gratitude a place without turning family into a bank.
Risks: disguised interest (a "gesture" that is really a charge) can change the nature of the deal.
Limits: this clause is written for the non-commercial case; business loans belong in other markets.

S4. Mutual support group (optional)

Draft: The parties activate a support group of [3 to 5] persons close to both of them, listed in Annex 2. The group is informed of the loan and its schedule. If an installment is more than [15] days late and the parties have not agreed on a new schedule, any party may ask the group to remind and to help find a solution, together, in private.

Why it makes sense: borrowed from microcredit practice: a small group that reminds together works better than one embarrassed lender, and carries no single accuser.
Advantages: spreads the social weight of reminding; the Borrower answers to a circle they chose, not to a stranger.
Risks: the group learns about the loan (a privacy trade-off both parties must accept when signing); a badly chosen group can turn into pressure.
Limits: the group has no legal power; its strength is social, which is exactly the point.

S5. Guarantor (optional)

Draft: [Name], trusted by both parties, guarantees repayment up to [capped amount], only after the steps of clause S7 have been exhausted, as detailed in the guarantor addendum signed by all three.

Why it makes sense: a guarantor converts "do I trust you?" into "we both trust her", which is an easier question.
Advantages: the cap and the "only after S7" condition protect the guarantor from becoming the default payer.
Risks: guarantees among close persons can move the conflict rather than solve it; the guarantor must genuinely understand the cap.
Limits: some jurisdictions impose form requirements on personal guarantees; validation by lawyers is required before operational use.

S6. Pledge: object or service (optional)

Draft: As pledge, the Borrower [hands over / reserves] the object described in Annex 3 [example: a bicycle], or commits to the service described in Annex 3 [example: providing meals to the Lender's family for an agreed period], to be released or cancelled upon full repayment.

Why it makes sense: a visible pledge makes the commitment concrete without involving courts; a service pledge lets people with no valuables still offer security.
Advantages: simple, human-scale, and reversible: full repayment releases everything.
Risks: pledged objects can be damaged or contested ("that bike was worth more"); Annex 3 must describe value and condition at handover.
Limits: pledge rules (possession, sale of the pledge) are regulated differently across jurisdictions; lawyer validation required.

S7. Talk first: renegotiation before consequences

Draft: If repayment becomes difficult, the Borrower informs the Lender before the due date. The parties then try, in this order: (1) reschedule by amendment; (2) partial payment now, rest rescheduled; (3) conversion of part of the debt into agreed services. No recovery step (S8) may start while a renegotiation proposal made in good faith is pending. Neither party makes the difficulty public or raises it in front of others outside the mechanisms of this contract.

Why it makes sense: this is the heart of the market: most small-loan damage comes from silence and shame, not from bad faith.
Advantages: announcing a problem early is rewarded (no consequences while renegotiating honestly); the no-shaming line protects dignity on both sides.
Risks: endless renegotiation can become a way to never pay; the good-faith condition and S8's ladder limit that.
Limits: the clause cannot make a hard conversation painless; it makes it possible.

S8. Late payment and simple recovery ladder

Draft: If an installment is late and no renegotiation is pending: day [5], friendly reminder; day [15], formal reminder and, if used, the support group is asked to help; day [30], the guarantor or the pledge is called upon as agreed; after that, mediation, then arbitration (S9). Each step is recorded on the platform. No step may be skipped.

Why it makes sense: everyone knows the whole ladder in advance; nothing is a surprise, nothing is arbitrary.
Advantages: "no step may be skipped" protects the Borrower from sudden escalation and the Lender from endless waiting.
Risks: fixed day counts can be too rigid for genuine hardship; the amendment mechanism can adjust them case by case.
Limits: the ladder governs behavior between the parties; statutory rights remain whatever the ladder says.

S9. Dispute resolution

Draft: Disputes go first to the platform's messaging, then to mediation, then to arbitration. Given the amounts, both parties commit to trying mediation seriously before anything else.

S10. Signatures

Draft: Lender · date. Borrower · date. Optional: support group members acknowledge Annex 2; guarantor signs the guarantor addendum.

C. Annexes

Annex 1. Repayment table: installment number · date · amount · method · status.
Annex 2. Support group: names, contact preference of each member, what they agreed to do.
Annex 3. Pledge description: object (description, condition, agreed value, who holds it) or service (nature, frequency, duration, cap).
Annex 4. Pedagogical commentary: the full commentary of every clause, as on this page.

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