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In this video tutorial, the host explains how to write a payment agreement, a legally binding document between a lender and borrower that details the loan's terms, including the amount, payment schedule, and penalties. To start, the agreement should include a statement confirming the signer's understanding and acceptance of their financial responsibilities, such as agreeing to pay the specified amount within a designated timeframe. Additionally, the payment agreement should outline the penalties for late payments, which can vary based on individual agreements, allowing for adjustments in percentage rates and amounts as needed.