Lending money without writing it down is how relationships and businesses get damaged. A loan agreement records the amount, the terms and the repayment plan, so everyone remembers the same deal. Here is what a solid one contains.
A loan agreement, sometimes called a promissory note or IOU, is a document recording that one party has lent money to another and the terms for paying it back. It sets out the amount, any interest, the repayment schedule and what happens if payments are missed.
It turns an informal favour into a clear, enforceable arrangement. For the lender, it is proof of the debt and the terms. For the borrower, it sets a clear plan and prevents misunderstandings about what is owed.
Use one whenever money is lent and expected back, between individuals, between businesses, or from a business to a person. The larger the amount, the more essential it is.
Sign it when the money is handed over. If repayment is in instalments, a linked payment record or receipt for each instalment keeps the balance clear.
The clauses a solid loan agreement should cover.
Pairs with a instalment receipts. Issue a receipt for each repayment so the running balance is always clear. Open the tool.
This page is general information, not legal advice. Agreement templates are a starting point and may need adjusting for your situation and the laws where you are. For anything high-value or complex, have a qualified lawyer review it.
A simple written record of a loan can be valid, but a clear agreement with the amount, terms and both signatures is far stronger and easier to enforce if there is a dispute.
That is up to the parties. Many personal loans are interest-free, but state clearly either way. If you charge interest, check any limits that apply where you are.
A written agreement with a repayment schedule and late-payment terms gives you a clear basis to act. Keep records of what was paid and when.
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