Loan Agreement in the UK: Template and Key Clauses (2026)

A loan agreement in the UK is a contract under which a lender advances money to a borrower who agrees to repay it, usually with interest, on agreed terms. It can be a formal bank facility, a business loan between companies, or a loan between individuals or from a director to a company. The terms you need depend on who is borrowing and why, because a loan to an individual for personal use can be regulated, while most genuine business loans are not. This is general information, not legal advice. Lending can be a regulated activity, so take advice before lending to consumers or taking security. ## When the Consumer Credit Act applies The most important early question is whether the loan is regulated. The Consumer Credit Act 1974, together with rules made by the Financial Conduct Authority, regulates credit provided to individuals and sole traders for non business purposes, and sets out strict requirements on form, pre contract information, the right to withdraw and more. Lending to consumers by way of business usually needs FCA authorisation. Most loans between companies, and genuine business loans, fall outside this regime, but do not assume: a loan to an individual, even a director, may be caught. Check the status before you lend.<!-- [VERIFY] current FCA authorisation thresholds and exemptions for consumer credit as at 2026 --> ## Key clauses, clause by clause 1. Parties. Name the lender and borrower, and any guarantor. 2. The loan and purpose. State the amount, whether it is advanced in one sum or drawn down in tranches, and any restriction on how it is used. 3. Interest. Set the interest rate, whether fixed or variable and how a variable rate is set, how interest is calculated and when it is paid. If there is no interest, say the loan is interest free to avoid doubt. 4. Repayment. Set the repayment schedule, whether by instalments or a single bullet repayment at the end, and the final repayment date. Allow or restrict early repayment and say whether a fee applies. 5. Security. State any security for the loan, such as a charge over assets, a debenture or a personal guarantee. Security over company assets usually needs to be registered at Companies House within the required period, or it can be void against a liquidator. 6. Representations and warranties. The borrower confirms matters the lender relies on, such as that it has the power to borrow and the information it gave is accurate. 7. Covenants. Positive and negative promises, for example to provide accounts, not to take on further debt above a limit, or not to grant other security. 8. Events of default. List what lets the lender demand immediate repayment, such as missed payments, breach of covenant, insolvency or giving false information. State any cure period. 9. Default interest and costs. A higher interest rate on overdue amounts and the right to recover enforcement costs. Keep default interest at a genuine level, since a penalty is not enforceable. 10. Set off and payments. How payments are made and applied, and any set off rights. 11. Assignment. Whether the lender can transfer the loan and whether the borrower can transfer its obligations. 12. Governing law and disputes. Choose the law and courts. ## Security and guarantees If the loan is secured, the type of security and the steps to make it effective matter as much as the loan terms. A charge over a company's assets usually must be registered at Companies House within the statutory period to be effective against other creditors. A personal guarantee from a director should be a separate, clearly worded document, and the guarantor should understand that their personal assets are at risk. Take advice before relying on security. ## Common mistakes to avoid - Lending to an individual without checking whether the Consumer Credit Act and FCA rules apply.

• No clear repayment date or schedule, so when repayment is due is uncertain.
• Taking security but failing to register it in time, so it is void against a liquidator.
• A default interest rate so high it is an unenforceable penalty.
• No events of default, so the lender cannot act early when the borrower is in trouble.
• A director to company loan with no written terms, causing tax and accounting problems. ## Guarantees and understanding the risk Where a loan is backed by a personal guarantee, the guarantor takes on a serious personal risk that is easy to underestimate. The guarantee should be a clear, separate document, and the guarantor should have the chance to take independent advice before signing, since a guarantee given without proper understanding can later be challenged. State plainly what the guarantor is liable for, whether the lender must pursue the borrower first, and when the guarantee ends. ## Keeping loans and their covenants tracked A lender or a company with several facilities must track repayment dates, interest resets, covenant tests and security registrations across each agreement, and hold the current signed version. When loan documents and their deadlines sit in scattered files, a missed covenant test or an unregistered charge can be serious. Adira is an AI workspace, built on Claude, where you can draft a loan agreement from a tuned template, review the events of default and security clauses for risk, sign it electronically, and track repayment dates and covenant deadlines in one place, with public per seat pricing and a 7 day trial. It is India first and global capable, and a command centre view of financial obligations is on its roadmap. The essential guidance does not need any product: check whether the loan is regulated, fix a clear repayment and default regime, and perfect any security on time.