Informal Loan Agreement Template for Saudi Arabia

The Informal Loan Agreement is designed for use in Saudi Arabia when parties wish to document a lending arrangement in a manner that is both legally valid and compliant with Islamic principles. This document type is particularly useful for personal loans, small business financing, or family lending situations where a formal bank loan is not necessary or desired. The agreement captures essential elements including loan amount, purpose, repayment terms, and any security arrangements, while ensuring compliance with Sharia law's prohibition of interest (riba). It provides a clear framework for both parties while maintaining sufficient formality to be enforceable under Saudi Arabian law if disputes arise. The document can be adapted for various lending scenarios while maintaining its core Sharia-compliant structure.

1. Parties: Identification and details of the lender and borrower

2. Background: Context of the loan arrangement and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Loan Amount and Purpose: Specification of the loan amount and its intended use

5. Sharia Compliance Declaration: Statement confirming the loan's compliance with Islamic principles

6. Repayment Terms: Schedule and method of repayment, structured to avoid interest

7. Default and Consequences: Actions and remedies in case of payment default

8. Representations and Warranties: Statements of fact by both parties regarding their capacity to enter into the agreement

9. Notices: How official communications between parties should be made

10. Governing Law and Jurisdiction: Confirmation of Saudi law application and dispute resolution mechanism