Sample of Personal Loan Agreement Between Friends or Family Members


It is critical to review a sample of personal loan agreement between friends or family members before you actually borrow or lend the money. When dealing with money with anyone, whether its your neighbor, colleague, cousin or uncle, you want to be extremely careful because it can easily dampen or destroy a relationship if one party fails to comply with the other. Therefore, no matter who is doing the lending or borrowing, a contract is needed to clear any confusion or disagreements. My mother used to tell me that if I were to lend someone money, no matter who it is, lend that person an amount that I would be okay never getting back.

I have followed her advice in life and have only given a loan twice in my life. Both were paid back in full, interest included, but I did it knowing that I would not end my relationship even if I were to never get that money back. If a friend or family member ever approaches you to borrow money, tell them that they can borrow money at a bank. If they refuse to do this, it usually means they have bad credit and you need to proceed with caution. Below, I will provide you with a sample contract to borrow money from friends or family so that you don’t destroy relationships or end up in court.

Sample Contract to Borrow Money with Interest


Every contract should be precise and simple as possible. You want to provide exact dates with the years included so that there is no confusion or loopholes. Before you start writing a contract, I highly recommend you start jotting down the conditions you want to be stipulated in the contract. Once you have more information on the specific dates and numbers, you can fill in the underlined portions of the sample agreement provided below.

On June 6, 2013, I, John Doe will lend Robert Doe a sum of $12,000 in the form of (cash, check, traveler’s check, or money order), which is to be repaid in full by December 6, 2013.

Payments will be made over a period of 6 months, starting on July 6, 2013 and ending on December 16,2013. The interest rate is 5% and as a result, each monthly payment will amount to $2,100.

Every monthly payment must be made before or on the 6th of every month. Any late payments will result in an additional fee of $50.

Robert Doe, (Borrower)                     John Doe, (Lender)

June 6, 2013, (Date)                           June 6, 2013, (Date)

_______________(Signature)            _______________(Signature)

Additional Measures of Protection

In addition to signing a contract outlying your basic agreements, you can go further by deciding on terms of default, which will describe what will happen in the even that the borrower is unable to pay back his loan. The most common terms of default usually include additional fees, a rise in the interest rate or collateral, which is a possession that the borrower is willing to give up when he or she can’t pay the loan back in time. Most common forms of collateral consist of cars, homes and jewelry.

Another great safety measure is getting your contract notarized. In this case, both the lender and borrower must appear before notary public and sign the contract in a third parties’ presence. Although there is a small fee, it is well worth it for the additional security.


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Posted in Personal Loan Agreement
One comment on “Sample of Personal Loan Agreement Between Friends or Family Members
  1. Joanna says:

    Thank you so much for this sample letter for personal loan agreement. I’ve searched everywhere on the web for a template I could use and this was very helpful! Thanks for the great info.

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