Instalment agreement with template: how creditors secure instalments properly

When is an instalment plan the right solution?

An instalment plan makes sense when the customer wants to pay but cannot pay everything at once right now. Typical signs: they get in touch of their own accord, give a reason for the shortfall and propose amounts. In this situation a clean instalment plan often brings you money faster than court proceedings.

An instalment plan is not a good idea in these cases:

• The customer disputes the work or the amount. Then you have a dispute, not a liquidity problem. Resolve the objection first.
• The customer stays silent and only responds to pressure with a vague offer.
• The instalments offered are so small that the claim would only be paid off after years.
• There are warning signs such as returned direct debits, frequent changes of bank or enforcement by other creditors.

Before agreeing to anything, ask for a specific proposal with a down payment, instalment amount and term. Customers who cannot or will not provide that belong in a handover to a collection agency rather than in an instalment plan.

Why is the acknowledgement the most important sentence?

With an instalment agreement the customer confirms that they owe the claim. Legally this is an acknowledgement (Anerkenntnis), and it has a powerful consequence: the limitation period starts again. From the day after the acknowledgement, a full three years run again. If you have also deferred payment, the limitation period is additionally suspended for the duration of the deferral. How suspension and restart interact is explained in our guide to limitation periods for claims in Germany.

So write the acknowledgement in expressly, with the amount, invoice numbers and reference date. A sentence such as “The debtor acknowledges owing the creditor a total of 5,010.16 euros as at 15 November 2026” leaves no room for interpretation. It is also your best evidence if you later need a court payment order or a lawsuit after all.

Put the agreement in writing and have both parties sign it. Under the German Civil Code (BGB), an acknowledgement of debt that is meant to stand independently of the original contract requires written form. Between merchants this form requirement does not apply. With both signatures you are on the safe side in any case.

What belongs in an instalment agreement?

This checklist covers everything you need if the customer defaults:

• parties with full name or company name, legal form, address and representation
• total claim as at the reference date, broken down by invoices, principal, interest and costs
• the express acknowledgement of this total claim
• down payment with amount and date
• instalments with amount, due date and number, plus the amount of the last instalment
• payment method: account, account holder, payment reference or direct debit mandate
• rule on interest during the term
• allocation of payments to costs, interest and principal
• acceleration clause in case an instalment is missed
• reservation that you are not waiving any part of the claim
• place, date and signatures of both parties

File the signed agreement with the invoice and set a follow-up reminder for every instalment date.

Template: instalment agreement

The following template is intended for transactions between businesses. Replace the details in square brackets. For consumers, read the next section first.

Instalment agreement

between [company, legal form, address, represented by], hereinafter “creditor”, and [name or company, legal form, address, represented by], hereinafter “debtor”.

1. Acknowledgement. The debtor acknowledges owing the creditor a total of [amount] euros as at the reference date [date]. This amount consists of: principal from invoice no. [number] dated [date] for [amount] euros, less payments already made of [amount] euros; late-payment interest up to the reference date [amount] euros; lump sum and costs [amount] euros.

2. Down payment and instalments. The debtor pays a down payment of [amount] euros by [date]. The debtor pays the remainder in [number] monthly instalments of [amount] euros each, due on the [day] of each month, first on [date]. The last instalment amounts to [amount] euros and is due on [date].

3. Payment method. Payments are made to account [IBAN], account holder [name], payment reference [invoice number]. A payment is on time if it has been received in this account on the due date.

4. Interest. As long as all payments are received on time, the creditor will not charge further interest on the remaining amount. [Alternatively: Interest of [rate] per cent per year accrues on the outstanding balance.]

5. Allocation. Payments are allocated first to costs, then to interest and finally to the principal.

6. Acceleration clause. If the debtor is in default with a payment, in whole or in part, for more than [7] days, the entire amount then outstanding falls due immediately. From that point, statutory late-payment interest accrues on the outstanding amount.

7. Reservation. With this agreement the creditor does not waive any part of the claim. All rights remain in place until payment in full. Amendments to this agreement must be made in text form.

[Place, date] Signature of creditor
[Place, date] Signature of debtor

Send the document to the customer as a PDF and ask for the signed version back before you treat the down payment as the starting signal.

Acceleration clause: what happens if an instalment is missed?

Without an acceleration clause, each instalment only falls due on its own date. If the second instalment is missed, you could only demand that one instalment and would have to wait for the others. The acceleration clause solves this: in case of arrears, the entire remainder falls due immediately. This is also called loss of the instalment benefit (Terminsverlust). Between businesses you can link this consequence to a single missed instalment, as in the template.

With consumers, caution is needed. If you charge a fee for the payment deferral, such as interest or an instalment surcharge, consumer credit law may apply. Then additional mandatory information, a right of withdrawal and stricter rules for calling in the whole amount apply: the customer must be in arrears with at least two consecutive instalments and a certain minimum share, and you must have set an unsuccessful two-week deadline. With consumers, a short instalment plan without any additional fee is therefore the simplest solution. For anything else, get a legal review.

If an instalment is missed, react within a few days. Send one written reminder with a short deadline. If nothing arrives, the remainder is due and you can have it enforced without new negotiations.

How are part payments allocated?

Without an agreement, the statutory order applies: a payment first settles the costs, then the interest and finally the principal. If the customer has several invoices outstanding, they may decide which one they are paying. If they do not specify, the BGB sets the order: first the debt that is due, then the less secured one, the more burdensome one and finally the older one. In practice these rules often lead to disputes when a customer later claims an instalment was meant for a different invoice.

That is why the allocation belongs in the agreement, together with a fixed payment reference. How to allocate incoming payments and carry the remaining balance forward correctly is shown in our article on partial payments and the outstanding balance.

Example: 4,800 euros in six payments

Example: an IT service provider invoiced its business customer 4,800 euros, contractually due on 15 July 2026. The customer does not pay and gets in touch at the beginning of November citing a cash shortfall. Both agree an instalment plan with a reference date of 15 November 2026.

The interest rate is the base rate of 1.52 per cent, which has applied since 1 July 2026, plus 9 percentage points for transactions not involving a consumer. The late-payment interest calculator works out the interest for your own invoice.

On 15 February 2027 the third instalment is missed. The IT service provider sends a reminder on 18 February with a deadline of 22 February. When nothing arrives by then, the remaining 2,400 euros fall due immediately under the acceleration clause, with late-payment interest again from then on. Thanks to the acknowledgement, there is no need to argue again about the basis or the amount of the claim.

What should creditors watch out for with instalments?

• Down payment: a noticeable first payment shows that the customer is serious. The instalment plan only applies once the signed agreement is in place and the down payment has arrived on time.
• Short term: the longer the plan, the higher the risk of default. Draw the line at a few months.
• Creditworthiness: for larger amounts, obtain a credit report and check whether the same customer has other open items.
• Direct debit: a direct debit mandate takes the active transfer out of the customer's hands and makes defaults visible immediately.
• No side agreements: verbal promises on the phone belong in the file in writing; otherwise only what is signed counts.
• Consistency: react to the first missed instalment, not the third.

If a customer has already broken earlier promises, read what to do when a customer breaks a promise to pay.

Instalments after handing over to incaseof.law

You do not have to negotiate instalments yourself. If you hand over a due, undisputed claim to incaseof.law, the debtor can apply for an instalment plan in the debtor portal. It is accepted according to fixed rules that are the same for everyone. That avoids drawn-out negotiations, and your customer still gets a fair route to payment.

The handover takes place online in the client portal: register, enter the debtor, amount and due date, upload the invoice and supporting documents. 100 % of the principal claim goes to you; the defaulting debtor bears the default costs within the legally permitted limits. Recovery and duration are not guaranteed. If the customer pays you directly, report it via the portal. How this works in day-to-day operations is shown on the receivables management page, and the starting point for a single case is submit a claim.