Loan Agreement

Loan Agreement: Create a Verified Loan Contract

A verified loan agreement is a contract in which a lender lends money to a borrower, who agrees to repay it on set terms. It records the amount, any interest, the repayment schedule, any security or guarantee, and what happens on late payment, default or the borrower's death. Robot Lawyer drafts the agreement from your answers, for the law of the country or state you choose. On the Verified plan, a legal professional checks it before you sign.

CONTENTS

What Is a Loan Agreement?

A loan agreement puts a loan on a formal footing. Even between family and friends, a written agreement avoids misunderstandings about whether the money was a loan or a gift, when it must be repaid and what happens if it isn't. It also gives the lender clear evidence if the loan ever needs to be recovered.

When Do You Need One?

• Personal loans
  Lending to or borrowing from family, friends or colleagues.
• Business loans
  A director, shareholder or investor lending to a company, or one business lending to another.
• Larger or longer loans
  Any loan where the amount or the repayment period makes a written record essential.

What's Included in Your Agreement?

• The loan
  The amount, the currency and when the money is paid over.
• Interest
  The rate and how it is calculated, or that the loan is interest-free.
• Repayment
  The schedule, the payment method and whether early repayment is allowed.
• Security and guarantees
  Any asset securing the loan, or a guarantor, where you choose one.
• Late payment and default
  Any late-payment interest, and when the lender can demand full repayment.
• If the borrower dies
  What happens to the outstanding loan, such as a demand on the estate with a set period to repay, so the borrower's family and the lender both know where they stand.
• Governing law and signatures
  The law that applies and signing blocks for both parties.

Consumer Credit (UK Only)

In the UK, lending to individuals as a business is regulated under the Consumer Credit Act 1974 and needs FCA authorisation. Most private loans between friends and family, and loans to companies, are not regulated. If you lend money as a business to individuals, take specific advice before using a standard agreement.

How It Works on Robot Lawyer

1. Answer the questions
   Tell us about the lender, the borrower, the amount, the interest and the repayments.
2. Generate your agreement
   We draft a complete loan agreement with a repayment schedule.
3. Get it verified
   On the Verified plan, a qualified legal professional checks the agreement within 24 hours and makes amendments where needed. See how our documents are verified.
4. Sign and lend
   Both parties sign before the money is paid over.

Loan Agreement FAQs

Do I need a loan agreement for a family loan?

It is strongly recommended. Without one, it can be hard to prove the money was a loan rather than a gift, especially if the borrower dies or the relationship breaks down.

What happens to a loan if the borrower dies?

The debt doesn't disappear. It is usually payable from the borrower's estate. Your agreement says exactly what happens, for example that the lender can demand repayment from the estate within a set period.

Can I charge interest on a personal loan?

Yes, you can agree any reasonable rate, or make the loan interest-free. Interest received may be taxable income for the lender.

Should a loan agreement be a deed?

It can be. A deed doesn't need consideration and gives a longer limitation period in England and Wales. Your agreement is drafted to be signed in the right form.

Create a Verified Loan Agreement

Protect both lender and borrower with clear terms. Related documents: Promissory Note, Personal Guarantee, Security Agreement and Amortisation Schedule.