Free Loan Agreement Template, Fill & Sign Online
A loan agreement records who lent what to whom, on what terms, and what happens if it is not repaid. Between businesses this is routine. Between family members it is the document that keeps a loan from quietly becoming a gift, legally, and at Christmas.
Two things surprise people. First, a court will often treat an undocumented family transfer as a gift, which means you cannot sue for it. Second, lending interest-free can have tax consequences: the US imputes interest above certain amounts under the Applicable Federal Rate rules.
Self-signing is free, local & private, never uploaded. Sending for signature needs a free account (just your email).
What a loan agreement must state
- Principal: the exact amount, in figures and words, and the date it was advanced.
- Interest: the rate, whether simple or compound, and how it is calculated. If the loan is interest-free, say so explicitly rather than leaving it blank.
- Repayment schedule: instalment amounts and dates, or a single maturity date. Vagueness here is what makes a loan unenforceable.
- Prepayment: whether the borrower may repay early, and whether that reduces interest owed.
- Default: what counts as default (a missed payment, or 30 days late?), and what the lender may then do.
- Security: if anything backs the loan, identify it precisely. An unsecured loan means you queue with everyone else if the borrower fails.
- Governing law: which jurisdiction's courts hear a dispute.
Mistakes that make a loan unrecoverable
- No written agreement between family. Courts routinely find that an undocumented transfer to a relative was a gift, and gifts cannot be recovered.
- No repayment date. A loan "repayable when he can" may never become due, which also means the limitation clock may never start.
- Charging no interest on a large loan without checking tax rules. Some tax authorities impute interest income to the lender anyway.
- Skipping the default clause. Without it you have a promise but no stated remedy, and enforcement gets slower and more expensive.
Common questions
Is a loan agreement legally binding if we're family?
Yes, provided it has the normal elements of a contract — an amount, repayment terms and both signatures. Family status changes nothing legally. What it changes is the evidence: without the document, a court has to guess whether you meant a loan or a gift.
Do I have to charge interest?
Not as a matter of contract law. But tax authorities in several countries impute interest on larger interest-free loans, so the lender may be taxed on income never received. Check the threshold in your jurisdiction before writing zero.
What is the difference between a loan agreement and a promissory note?
A promissory note is a one-sided promise to pay. A loan agreement is a two-sided contract that can also cover security, default, prepayment and covenants. For anything beyond a simple IOU, the agreement is the safer choice.
This page is general information for small businesses, not legal advice. For your specific situation, talk to a licensed attorney in your state.