Loan Agreement Between Individuals: Template and How to Draft One (2026)

What a loan agreement between individuals is A loan agreement between individuals is a written contract that records one person lending money to another and the borrower's promise to repay. It names the lender and borrower, states the amount, sets the repayment terms, says whether interest is charged, and spells out what happens if the borrower does not pay. It is used for loans between friends, family members, or private parties, and it works for a one-off lump sum or money repaid in instalments. The reason to write one is simple and a little uncomfortable: money lent without a record is the fastest way to lose both the money and the relationship. A written agreement proves the money was a loan and not a gift, which is the single most common dispute, and it removes the awkward guesswork about when and how it gets paid back. Even between people who trust each other completely, a short agreement protects the friendship by making the terms clear from the start. This is general information, not legal advice. Interest limits, stamp duty, tax and enforcement rules for private loans vary by country and state, so confirm the local position and, for a large loan, have the agreement reviewed by a qualified professional. ## A loan agreement template you can copy ```

LOAN AGREEMENT Date: [date] Lender: [full name and address] Borrower: [full name and address] 1. THE LOAN The Lender agrees to lend, and the Borrower agrees to borrow, the sum of [amount in words and figures] (the "Loan"). 2. PAYMENT OF THE LOAN The Lender will pay the Loan to the Borrower by [bank transfer to account / other] on or before [date]. 3. INTEREST [Choose one] (a) The Loan is interest-free; or (b) Interest is charged at [rate] percent per [year], calculated on the outstanding balance, from the date the Loan is paid. 4. REPAYMENT [Choose one] (a) The Borrower will repay the Loan in full, with any interest, on or before [date]; or (b) The Borrower will repay the Loan in [number] instalments of [amount] on the [day] of each month, starting [date], until repaid in full. Repayments are made to [the Lender's account]. 5. EARLY REPAYMENT The Borrower may repay all or part of the Loan early at any time without penalty. Early repayment reduces the interest due accordingly. 6. SECURITY / GUARANTOR [Choose if applicable] This Loan is [unsecured] / secured by [describe asset or charge] / guaranteed by [name of guarantor, who signs below]. 7. DEFAULT The Borrower is in default if a payment is more than [number] days late or the Borrower becomes insolvent. On default, after [grace period] written notice, the Lender may demand immediate repayment of the whole outstanding balance, with [default interest at X percent]. 8. COSTS The Borrower pays the Lender's reasonable costs of recovering an overdue amount, to the extent allowed by law. 9. GENERAL This agreement is the whole agreement between the parties. Any change must be in writing and signed by both. This agreement is governed by the law of [place]. SIGNED Lender ____________ Date ______ Borrower ____________ Date ______ Guarantor (if any) ____________ Date ______ Witness (optional) ____________ Date ______

- Silence on interest. Not saying whether interest applies is a classic source of dispute. State it either way.
- Vague repayment terms. "Pay me back when you can" is not enforceable and strains the relationship. Use dates and amounts.
- Ignoring interest caps and usury rules. An interest rate above the local limit can be unenforceable or unlawful.
- No default clause. Without one, the lender has no clear right to act when payments stop, and may have to argue it from scratch. ## How jurisdiction changes things Private lending is regulated more than people expect. In India, a loan agreement or promissory note usually attracts stamp duty, which varies by state, and an unstamped document can be inadmissible as evidence until stamped; interest and recovery are also shaped by state money-lending laws and general contract law, and there is no single national usury cap for one-off private loans, so local rules apply. In the United States, state usury laws cap private interest rates and the caps differ widely. In the UK, lending in the course of a business usually needs regulatory authorisation, while genuine one-off private loans between individuals are generally outside that regime. Tax can apply to interest the lender receives. Confirm the stamp duty, interest-limit and tax position where you live before you finalise the agreement. ## Keeping the agreement and its record together A personal loan is small, but it still generates a record that needs to stay together: the signed agreement, proof the money was paid, the repayment history, and any notices if things go wrong. The value of that record shows up exactly when a disagreement does, and that is when scattered messages and half-remembered terms fail you. That is the same discipline, scaled down, that organisations need across every agreement they sign. Drafting from a clear template, catching a clause that leaves interest or default unclear, editing wording in plain language, and holding each version with its date can live in one AI workspace tuned to how you document things. [Adira](https://adiralaw.com) is built around that single workspace idea for business contracts. For a loan between two people the template above and a signed copy each are enough; the habit worth borrowing is to keep the agreement and its proof in one place, so that if you ever need them, they are there and they agree.