In this brief blog, we will provide a Free family loan agreement template.

How do you make a private loan agreement?

To make a private loan agreement you should consider the below.

Drafting a private loan agreement by yourself is not ideal because if you have any issues in the future then you may have an issue if you cannot provide any legal arguments for the clauses which you have in your private loan agreement.

You should include the below in your private loan agreement.

Your contact information

If you are the lender then you should include your contact information. If you are not the lender then you should include a space for the lender to include their contact information.

Interest

The interest charged should be clearly stated so that both parties are fully aware. It should state in what format the interest will be charged and at what frequency. Hence is it simple or compound interest and it will be charged daily, weekly, monthly or annually.

Repayment terms

The loan agreement should state what the repayment terms are and if the loan can be repaid in one lump sum and if not at what frequency. The loan repayments can be monthly repayments with one balloon payment at the end.

Default terms

You should also consider what terms should be included in the loan if someone defaults or makes a late repayment. will there be any collateral involved and how or when will it be transferred to you.

Collateral

Do you want to include any collateral in the loan? This could be a car, a house, jewellery etc.

Guarantor

Will there be any guarantor on the loan and how far is their liability. E.g can they lose their property if the loan isn’t repaid?

Is a loan agreement legally binding?

A loan agreement is legally binding once it has been signed or agreed verbally (based on your jurisdiction). This means that you must stick to the terms of the agreement if not you will be legally liable.

Can I loan a family member money?

Yes, you can loan a family member money but you should consider doing this with a family loan agreement which is legally binding if not you may find yourself in a legal dispute with your family member if anything goes wrong with the loan and the terms aren’t clear.


What should be included in a loan agreement?

A loan agreement should include the below:

The names and addresses of both parties.

The amount to be loaned

The interest on the loan.

How the interest is charged on the loan.

The details on the collateral if any.

The terms on late payments and defaults.

How the loan should be repaid.

The duration of the loan.

Family loan agreement template free

Below you will see a link to download a free Family loan agreement template.

Download here.

Sample of a Family loan agreement template

Below is a sample of a family loan agreement.

Free family loan agreement (sample 1)

Free family loan agreement (sample 2)

Free family loan agreement (sample 3)

In this brief guide, we discussed what should be included in a family loan agreement and provided a free family loan agreement template. You should still seek independent legal advice.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.