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Loan Agreement Template

Use our loan agreement template to detail the terms of a loan.

Updated November 13, 2023 Written by Sara Hostelley | Reviewed by Brooke Davis

A loan agreement is a legally binding contract between a lender and a borrower that a court can enforce if one party doesn’t follow the arrangement. It establishes how much money the lender is loaning and sets other terms, including the repayment schedule and interest.

Types of Loans

Secured Loans: They require collateral as a precondition for borrowing, typically a home or vehicle.

• Auto Loans: Use to purchase a vehicle.
• Mortgage Loans: Use to buy a home.
• Personal Loans: Use to fulfill any personal needs you have.

Unsecured Loans: They don’t require collateral. A borrower promises to repay the amount via a contract.

Variable-Rate Loans: They have an interest rate that changes over time.

Fixed-Rate Loans: They have an interest rate that stays the same for their entire duration.

Payday Loans: They’re short-term and immediate loans with high interest rates.

Loan Agreements By Type

When to use a loan agreement, how to get a loan, how to notarize a loan agreement, loan agreement terms and conditions, how to write a loan agreement, loan agreement sample, frequently asked questions.

Business Loan

Payment Plan

Promissory Note

Release of Debt

Deed of Trust

Mortgage Deed

You should use a written loan agreement whenever you lend or borrow money. Here are some situations where you may need to create this document:

• Starting a business with a capital loan [1]
• Purchasing land or a home with a real estate loan
• Investing in a college education or repaying a student loan
• Buying a new car or boat
• Getting a paycheck advance from an employer
• Helping a friend or family member with a personal loan

When making a loan agreement contract between family members, you should be aware that there can be tax implications. For example, if you lend money without interest, the IRS may charge you tax because it would be below the minimum interest rate required for family loans. This amount is the Applicable Federal Rate (AFR) [2] .

Also, if you’re borrowing money from family or friends and don’t have to repay the loan, the IRS will consider this transaction a gift and charge you income tax [3] .

If you see an exorbitantly high interest rate on a potential loan agreement, you shouldn’t sign it without serious consideration. You may be a victim of a loan shark, which is a lender who preys on individuals and charges the highest legal interest rate possible.

Step 1 – Check Your Credit Score

Your credit score indicates how likely you are to repay a loan. Lenders consider this metric when assessing your loan application.

The higher your credit score, the better chance a lender will want to loan to you. You can obtain your credit score from one of the three major credit bureaus, which are Experian , Transunion , and Equifax .

Once you learn your current credit score, you can understand which interest rates you may qualify for.

Step 2 – Compare Lenders

Shop around for the best personal loan option. Research and compare lenders based on interest rates, fees, repayment terms, and customer reviews.

You have several options to find personal loans:

• Banks could be the best option if you have a good to excellent credit score. They offer low interest rates, few fees, and flexible repayment terms.
• Credit unions offer loans to their members. They tend to have lower interest rates and fees and can’t charge more than 18% APR (annual percentage rate) on personal loans [4] .
• Online lenders let you prequalify, apply for, and receive personal loans online, but they have higher APRs and fees than banks and credit unions.

Consider obtaining a loan from a family member or friend who has extra money to lend. Even if you know the lender well, it’s still a good idea to get a personal loan agreement in writing.

Step 3 – Gather Necessary Documents

Lenders may request several documents to verify your information. Gather them in advance so you can present them when lenders request them.

Examples of these documents include proof of identity (like a driver’s license or an affidavit of identity ), proof of income , bank statements, and rental or mortgage agreements.

Step 4 – Get Prequalified for a Loan

Many lenders offer a prequalification process involving a soft credit check that estimates the loan amount and interest rate you might qualify for. Thanks to prequalification, you can preview the potential offers you may get from lenders and narrow them down based on potential interest rates, fees, terms, and amounts.

Note that the prequalification process doesn’t guarantee you’ll get a loan. It also doesn’t require you to accept one.

Step 5 – Start the Application Process

If you’re satisfied with the prequalification terms, pick one that matches your needs and proceed with the formal loan application. Complete the lender’s application form with accurate information, finalize the documents, and accept the terms.

Step 6 – Accept the Loan

If you receive loan offers after applying, review them carefully. Pay attention to the loan amount, interest rate, repayment term, and associated fees, and read and understand the fine print. You can accept the offer and sign the loan agreement if all the details meet your needs.

While most jurisdictions don’t require witnesses to legitimize this document, you may consider getting a notary public to sign it. A notary public will ensure all parties sign the document as themselves and without coercion.

Follow these steps to notarize a loan agreement:

Step 1 – Find a Notary Public

You can find a certified notary public at a local accountant’s office, lawyer’s office, bank, or public library. You may also use free online services to connect with a notary public who isn’t in your area.

Schedule a meeting with them. The other party (whether they’re the borrower or lender) can be present, but they may also have their signature notarized at a different time.

Step 2 – Meet With the Notary Public

Meet with the notary public. Present a valid form of government-issued ID so they can confirm your identity.

Step 3 – Sign the Agreement

Sign the agreement in front of the notary public. Once you sign, they’ll add their seal to your document.

Step 4 – Pay the Associated Fee

Pay the nominal fee for the notary public’s services. Depending on where you live, you may expect to pay between a couple dollars and $10.

A loan contract contains basic details, including the principal amount and interest. Explore some other terms and conditions that you can include within this document:

Payback Options

This document can outline the desired payback option. For example, a lender may want the borrower to pay:

• In full on a certain date
• In installments of interest only (with the principal due at a later date)
• In installments of the principal and interest

Assignment refers to letting a lender sell their right to collect payments from a borrower. This option may be useful if the lender no longer wants to collect payments from the borrower.

A guaranty provision states that a cosigner will become responsible for the loan if the original borrower fails to repay the entire amount.

Acceleration

An acceleration clause explains whether the lender can increase the repayment date or make the borrower repay the loan immediately. Possible triggers for acceleration include:

• The borrower becomes bankrupt.
• The borrower fails to follow the agreed-upon payment schedule.
• The borrower wants to pay off the note early.
• The borrower sells off a significant or material portion of their assets.

An amendments clause can outline how either party can alter the original agreement.

A collateral provision is essential for a secured loan, as it defines what property the lender can keep if the borrower defaults.

A prepayment clause determines if the borrower can pay off the loan and interest early. If the lender permits, this clause may allow the borrower to receive a discount for early payment.

Late Charges

A late charges clause states that the borrower is responsible for paying penalty fees if they make late payments.

Joint and Several Liabilities

Joint and several liabilities state that all borrowers are individually responsible for the total loan amount.

Maturity Date

The maturity date defines when the borrower should repay the full amount.

Step 1 – Name the Parties

This agreement should detail the lender’s and borrower’s full legal names.

Step 2 – Write Down the Loan Amount

Provide the amount the borrower will be loaning from the lender. This amount is the principal sum. It doesn’t account for the total amount, including accrued interest.

Step 3 – Specify Repayment Details

This section is where you must provide the details of the borrower’s loan repayment. The options you choose will have to be mutually agreed upon. You can choose whether the borrower will repay the loan in regular payments or at once.

• Regular Payments: The borrower repays the lender in a set number of payments over a specific period.
• Single Payment: The borrower repays the lender all at once by the date specified by the lender OR “on-demand” by the lender. With a “Due on Demand” payment option, the borrower repays the loan upon the lender’s demand.

If you choose regular payments, you must specify the repayment schedule, which can be monthly, quarterly, semi-annual, or annual installments.

Step 4 – Choose How the Loan Will Be Secured (Optional)

If you want the loan secured, you can include the property the borrower has put up for collateral. Make sure to provide as many relevant details as possible. Both parties must mutually agree upon this collateral for it to be legally valid in court.

Step 5 – Provide a Guarantor (Optional)

A cosigner or guarantor is optional and protects the lender if the borrower defaults on the agreement. You may require a cosigner if the borrower is in questionable financial standing. The cosigner is someone who jointly signs the agreement with the borrower.

If the borrower defaults and cannot pay back the amount in full, the cosigner is responsible for paying you back the due amount. The cosigner is usually someone in good financial standing or has excellent credit.

Step 6 – Specify an Interest Rate

You should include the interest rate you will be charging the borrower in a percentage. This interest rate will apply to the principal amount of the loan, and the borrower must agree to this rate.

Step 7 – Include Late Fees (Optional)

As a lender, you can charge late fees if the borrower does not meet a payment in time. Including a late fee can motivate the borrower to make payments on the agreed dates.

Step 8 – Determine Options for Prepayment

You can include whether penalties or discounts will apply if the borrower decides to pay the loan amount ahead of schedule. Alternatively, you can explicitly state that the agreement does not allow prepayment of the loan.

A penalty can prevent the borrower from paying the loan early and encourage long-term payments. The loan would then accrue more interest, which can be a favorable arrangement for the lender.

Step 9 – Include Provisions for a Default

When the borrower cannot repay the loan as the loan agreement details, the borrower has entered into default. It would be best to clarify how the borrower will default in the document. An agreement can say missing one payment causes a default, but a lender may choose to be more lenient.

A default can give you the legal right to accelerate payment. In this scenario, you can make the total loan amount due immediately.

Step 10 – Add in Relevant Terms

Further terms make up the remainder of the agreement and serve to protect the rights of both parties, and they include any remaining provisions such as:

• The legal right of the lender to enforce the terms of the agreement
• The costs and expenses associated with taking the case to court
• The transferability of the agreement
• The capability of alterations to part of or the entire agreement

Step 11 – Specify How You Would Like To Communicate

You can establish communication methods so both parties are on the same page. This preparation can prevent either party from claiming they didn’t receive a notice.

Step 12 – Include the Governing Law

Indicate your resident state in the agreement so both parties know which jurisdiction’s laws they must follow.

Step 13 – Determine the Resolution Method for Disputes

Detail the procedure for how both parties can resolve disagreements. Choose from several options, including court litigation, mediation, and arbitration.

Pursuing court litigation will mean the party who lost the case must pay the other party any costs and fees related to the court process.

Step 14 – Include All Relevant Signatures

All involved parties in the agreement, including personal guarantors and cosigners, must sign the document.

Download a free loan agreement template as a PDF or Word file below.

What’s the difference between a loan agreement and a promissory note?

A loan agreement and a promissory note are legal documents individuals use when borrowing money from another party. However, promissory notes tend to be shorter and more straightforward. They focus on the borrower’s pledge to repay and contain basic elements like the parties’ names, the loan amount, and the terms.

Loa agreements are more comprehensive since they outline the loan’s terms and conditions in greater detail. They often give both parties more protections, including borrower representations, warranties, and covenants.

For more detailed information, read our article on the differences between a loan agreement and a promissory note .

Can you cancel a loan agreement?

You can cancel this agreement in certain instances. Refer to the original document for termination conditions. You may also be able to cancel the loan if both parties agree to it or if you’re within your jurisdiction’s cancellation period for your specific loan type.

Can I write a loan agreement with a family member?

Yes. Consider writing this agreement when borrowing money from or lending to a family member. This agreement can help keep matters objective if you disagree about the loan’s terms later.

What does it mean to consolidate your loans?

Consolidating your loans involves obtaining one sizable loan to pay off all your loans. This way, you only have to make one payment each month. Consolidation may be a reasonable option if you can secure a loan with a low interest rate.

Legal Templates uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial guidelines to learn more about how we keep our content accurate, reliable and trustworthy.

• Working Capital Loan. https://investinganswers.com/dictionary/w/working-capital-loan
• Applicable Federal Rates (AFRs) Rulings. https://www.irs.gov/applicable-federal-rates
• Gift Tax. https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax
• National Credit Union Administration. Permissible Loan Interest Rate Ceiling Extended. https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/permissible-loan-interest-rate-ceiling-extended-2#ftn_1

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Loan Agreement

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A Loan Agreement is a written promise from a lender to loan money to someone in exchange for the borrower's promise to repay the money lent as described by the Agreement.

Its primary function is to serve as written evidence of the amount of a debt and the terms under which it will be repaid, including the rate of interest (if any). The note serves as a legal document that is enforceable in court creating obligations on the parts of both the borrower and the lender. Use this Loan Agreement template to lend or borrow money .

Though Loan Agreements are often referred to as IOUs or Promissory Notes, Loan Agreements are different than these documents in two key respects:

- First of all, Loan Agreements are binding on both the borrower and the lender ; and

- Secondly, Loan Agreements are much more detailed and include extensive provisions about when and how the borrower will repay the loan and what sorts of penalties will be incurred if the borrower does not follow through with repayment.

- Finally, Loan Agreements are usually used when large sums of money are involved , such as student loans, mortgages, car loans, and business loans. For smaller and/or more informal loans, such as those between family and friends, a Promissory Note should be used instead .

To find more information about whether a Promissory Note or Loan Agreement is more appropriate, please see the guide What is the Difference Between a Promissory Note and Loan Agreement?

How to Use this Document

This Agreement sets out all of the terms and details of the loan, including the names and addresses of the borrower and lender, the amount of money being borrowed, how often payments will be made, the amount of the payments, and the signatures of the parties .

This document can be used for different types of loans including the following:

• Installment Loan: The borrower pays off the loan, plus interest (if any), by making payments over a set period of time, such as annually, monthly, or weekly.
• Lump Sum Payment: The borrower pays off the money borrowed, plus interest (if any), in one single payment due on a pre-agreed upon date
• Due on Demand: The borrower pays off the money borrowed, plus interest (if any), in a single payment due at the time the Lender requests it.

The document can also specify whether or not interest will accrue on the loan and, if so, the interest rate that will be used. There is also. the option of including provisions to govern early payments as well as an acceleration clause that would cause the entirety of the loan to come due in the event of late payments or non-payment according to the agreed upon payment plan schedule.

Once all of the provisions of the contract have been filled out, both the borrower and the lender should print out and sign the document , each saving a copy for their records in case of future misunderstanding or dispute.

If the lender and the borrower decide to change the terms of the Loan Agreement, use an Amendment to Agreement form. Once the loan has been fully repaid, complete a Release of Loan Agreement form.

Applicable Law

Loan Agreements are governed by Article III of the Uniform Commercial Code (the "UCC") .

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Guides to help you

• How to Get your Debtor to Pay
• What is the Difference Between a Promissory Note and Loan Agreement?
• Mortgage Deed vs. Deed of Trust
• Should I Use a Promissory Note for a Friendly Loan?

Other names for the document:

Loan Agreement - Updated, IOU, Debt Agreement, Debtors Agreement, Lending Agreement

Country: United States

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Loan Agreement Template

Free Loan Agreement Templates and Sample

• • Borrower details
• • Loan terms
• • Repayment schedule

What is a loan contract, and why is it important?

A signed contract mitigates such risks to help all parties to fulfill their responsibilities reasonably.

DISCLAIMER : We are not lawyers or a law firm and we do not provide legal, business or tax advice. We recommend you consult a lawyer or other appropriate professional before using any templates or agreements from this website.

Download our free Loan Agreement Forms

When to use a loan agreement, the elements of a great loan agreement, 1. capturing details, 2. loan terms, 3. repayment schedule, 4. late charges, 5. signatures, download our free loan agreement form, faq about loan agreements, loan agreement, information, acknowledgement, promise to pay, late charges, governing law, alternative dispute resolution, entire agreement, severability, signature and date, related proposals and templates.

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Assignment And Assumption Agreement

Jump to section, what is an assignment and assumption agreement.

An assignment and assumption agreement transfers one party's rights and obligations to a third party. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

The assignor assigns their rights and duties under the contract to the assignee and the assignee accepts, or "assumes," those rights and duties.

The other party to the initial contract must also consent to the transfer of rights and obligations to the assignee. For a valid assignment and assumption agreement, the initial contract must provide for the possibility of assignment by one of the initial contracting parties.

Common Sections in Assignment And Assumption Agreements

Below is a list of common sections included in Assignment And Assumption Agreements. These sections are linked to the below sample agreement for you to explore.

Assignment And Assumption Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.D.13 3 d416323dex99d13.htm ASSIGNMENT AND ASSUMPTION AGREEMENT , Viewed October 6, 2021, View Source on SEC .

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Meet some of our Assignment And Assumption Agreement Lawyers

I was born and raised in Wayne, New Jersey and attended Seton Hall University, graduating cum laude. I followed my family down to Florida to attend Ave Maria School of Law where I graduated cum laude. I was admitted to the Florida Bar in 2018. During law school, I participated in the Certified Legal Internship program with the State Attorney's Office of the 20th Judicial Circuit and litigated 5 jury trials, 1 non jury trial and argued various motions before the court under the supervision of an Assistant State Attorney. I was an Assistant States Attorney for Collier County from 2018 to 2020 before moving into private practice in the areas of real estate and first party property from 2020 to 2021. As of November 2021, I started my own law practice that focuses on business planning, real estate and estate planning.

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I work with private tech companies on entity formation, corporate governance, and commercial agreements. I was an in-house counsel for a unicorn fintech startup and am currently associated with a startup boutique while operating my solo practice. I received my JD from Berkeley Law, and served in the US Navy for 5 years as a combat linguist. I am fluent in Korean.

Whitney L. Smith's journey from entrepreneur to advocate is fueled by a profound understanding of the business world. With a decade of firsthand entrepreneurial experience, she entered law school driven by a mission to protect others' businesses. However, her passion for real estate law blossomed as she recognized the tremendous benefits rental property ownership offers to individuals seeking passive income and community development. Blending her deep understanding of transactional law with zealous courtroom advocacy, she empowers landlords to thrive. Born and raised in St. Petersburg, Florida, she is a proud graduate of Stetson College of Law and cherishes her role as a devoted parent to two children and a beloved pit bull companion.

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I have 20-plus years of experience as a corporate general counsel, for public and private corporations, domestic and international. I have acted as corporate secretary for a publicly-held corporation and have substantial experience in corporate finance, M&A, corporate governance, incorporations, corporate maintenance, complex transactions, corporate termination and restructuring, as well as numerous aspects of regulatory and financial due diligence. In my various corporate roles, I have routinely drafted complex corporate contracts and deal-related documents such as stock purchase agreements, option and warrant agreements, MSAs, SOWs, term sheets, joint venture agreements, tender agreements purchase and sale agreements, technology licensing agreements, vendor agreements, service agreements, IP and technology security agreements, NDAs, etc. and have managed from both a legal and business perspective many projects in the financial, technology, energy and venture capital fields.

My practice focuses on business and commercial litigation. I have worked with companies of all sizes from sole member LLCs to those in the Fortune 500. I've advised clients on mergers, equity issuances, commercial transactions, joint ventures, employment issues, and non-competition. I've also drafted and negotiated the underlying agreements for these transactions and more.

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