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Family loan agreement template: borrowing money from family, in writing

A one-page agreement protects the money and the relationship. Here is what to put in it, clause by clause, with sample wording you can copy, a worked example, and our free generator to fill in and print.

Checked 2026-09-28 · All guides

Fill in your agreement

Use our free generator: fill in the names, amount and dates, then print it or save it as a PDF, and add the payment dates to your calendar. Everything stays in your browser. We never hold or move money. This is a template, not legal advice.

What do you want to make?

Loan agreement (full) Short IOU (one page) Schedule only

Has the money already been lent?

No, this is a new loan Yes, it was lent earlier (put it in writing now)

Lender's full name (who lends the money)

Borrower's full name (who repays it)

Lender's address (optional)

Borrower's address (optional)

Amount lent ($)

Date the money is (or was) given

Amount already repaid ($, if any)

How will it be repaid?

In regular payments All at once, by a date

Repaid in full by

How often?

Date of the first payment

Set the schedule by

Number of payments Amount of each payment

Number of payments

Amount of each payment ($)

Interest

No interest Charge interest

Interest rate (% a year)

Interest starts on (optional: leave empty to start on the day the money is given; set a later date for an interest-free start)

Lender's state

Borrower's state

Other loans the lender made in the last 12 months (optional)

The borrower is a relative

How payments are made (e.g. bank transfer to the Lender's account, or cash against a signed receipt)

Days of grace before a payment counts as late

If a payment is late

Late fee per late payment ($, optional)

State whose law applies (optional) Add a line for a witness

Everything stays in this browser. Nothing is sent to us or saved. We never hold or move money.

Why write it down?

Clarity. Memories drift. A page you both signed settles what was agreed.
The relationship. Nobody has to bring up the money awkwardly. The agreement already says what happens next, including what happens if things go wrong.
Tax. The IRS asks whether a loan was meant as a loan when the money changed hands (IRS Topic 453). A written agreement with a repayment schedule, payments actually made, and a record of them is the kind of evidence that helps show a real loan. It's good practice, not an IRS checklist.

For a small, short loan, a simple IOU may be enough. For a larger loan or a longer schedule, use a full agreement like the one below, or a promissory note.

What every family loan agreement needs, clause by clause

Swap the words in [brackets] for your own. Plain sentences you both understand beat legal-sounding ones.

1. Who is lending and who is borrowing

This agreement is between [Lender's full name], of [city, state] ("the Lender"), and [Borrower's full name], of [city, state] ("the Borrower").

2. The amount

The Lender is lending the Borrower $[5,000] (five thousand dollars).

Write the amount in numbers and in words, so there's no confusion.

3. The date the money changes hands

The Lender will pay this amount to the Borrower on [date], by [bank transfer / check].

Use the real date. If the money moved last month and you're only writing it down now, say so: "The Lender paid $5,000 on [real date]. We are putting the loan in writing on [today's date]." Never backdate an agreement.

4. What it's for (optional)

The Borrower will use the money for [car repairs / a rent deposit].

5. The repayment schedule

The Borrower will repay the loan in [24] monthly payments of $[217.68], due on the [1st] of each month, starting [date]. The last payment is due [date].

Pick a due date just after payday, and a schedule the borrower can really keep.

6. Interest

The loan carries interest of [4.25]% a year, included in the monthly payments above.

or: This loan carries no interest.

The IRS doesn't require families to charge interest. But it publishes a minimum rate each month, the applicable federal rate (AFR), and a loan below it can have tax effects under section 7872 of the tax code. For October 2026 the AFRs are 4.25% a year for loans of 3 years or less, 4.61% for over 3 and up to 9 years, and 5.22% for over 9 years (IRS Rev. Rul. 2026-19). Those rules don't apply on any day when all the gift loans directly between the two of you add up to $10,000 or less, unless the money buys income-producing assets like stocks or rental property. Married couples count as one person. For bigger loans, see what interest rate to charge family and interest-free family loans and tax.

7. Where the payments go

The Borrower will pay by [bank transfer to the Lender's account / a payment app / check], or another way the Lender names in writing. The Lender will confirm each payment by text or email.

Don't write full account numbers in it. A traceable payment (not cash) is its own record.

8. Paying early

The Borrower may pay off all or part of the loan early at any time, with no penalty. Interest stops on any amount paid back.

9. If a payment is missed

If a payment is more than [10] days late, the Lender and Borrower will talk first. The Borrower will say when they can pay, and we will agree any change in writing (clause 11). There is no late fee.

A grace period and a conversation keep a hard month from turning into a family fight. If you're the one waiting on money, our scripts for when someone owes you help you ask kindly.

10. If the borrower can't pay, or someone dies

If the Borrower can't keep up, the Lender may choose, in writing, to (a) pause payments for up to [3] months, (b) set a new, smaller schedule, or (c) forgive part or all of what is left.

If the Lender dies before the loan is repaid, the Borrower will pay the rest to the Lender's estate on the same schedule, unless the Lender's will says otherwise. If the Borrower dies, the unpaid balance is [owed by the Borrower's estate / forgiven].

Forgiving a loan counts as a gift for tax purposes (26 CFR §25.2511-1; Form 709 instructions). In 2026, one person can give another up to $19,000 in a year without filing a gift tax return, counting all gifts to that person that year.

What the law does if someone dies, whatever the agreement says:

If the borrower dies, the loan doesn't disappear. It is paid from what the borrower leaves behind (their estate), by the executor, following state probate law. If the estate runs out, the rest usually goes unpaid. Relatives don't have to pay it from their own money unless they co-signed, are a surviving spouse in a community-property state, are a spouse in a state that makes spouses pay certain debts, or were in charge of the estate and didn't follow the state's probate rules (FTC, "Debts and Deceased Relatives").
The nine community-property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska, South Dakota and Tennessee let couples opt in to community property (IRS Publication 555).
If the lender dies, the loan is part of what the lender owned, so it belongs to the lender's estate. The borrower still owes the money, now to the estate or to whoever inherits the loan. The estate's personal representative collects what the lender owned, pays the bills and passes on the rest (California Courts Self-Help). Keep the signed agreement and the payment record where the family can find them.

For a large loan, a probate lawyer in your state can explain how these rules apply to your family.

11. Changing the agreement

Any change to this agreement must be in writing, dated with the real date, and signed by both of us.

12. Signatures

Lender: ____________ Date: ______ Borrower: ____________ Date: ______

Each of you keeps a signed copy. A photo of the signed page on both phones works too.

A worked example: $5,000 over 24 months at 4.25%

Example. Jordan lends his sister Ana $5,000 in October 2026, repaid monthly over 2 years at 4.25% a year (the October 2026 short-term AFR).

Monthly rate: 4.25% ÷ 12 = about 0.354%. First month's interest: $5,000 × 0.354% = $17.71.
Monthly payment: $217.68 for 24 months (the last one is $217.71 to settle the cents).
Total repaid: $5,224.35, so total interest is $224.35 over two years.
Interest free instead: 24 payments of $208.33 (the last $208.41). Because the loan is under $10,000 and isn't buying income-producing assets, section 7872 wouldn't apply either way.

Interest Jordan receives is income he reports on his own tax return, even though no Form 1099-INT arrives (IRS Topic 403). Ana generally can't deduct interest on a personal loan.

Is a family loan agreement legally binding?

Yes. A written promise to repay money you were lent, signed by the borrower, is an enforceable contract. These are the formal rules, as we found them on the states' official code sites (checked 2026-09-27):

No notary or witness is needed. No state we checked requires a notary or a witness for an unsecured personal loan agreement, note or IOU. What's required is a writing signed by the borrower. In the Uniform Commercial Code, the model law every state has enacted in its own version, a promise to pay is "a written undertaking to pay money signed by the person undertaking to pay" (UCC §3-103), and a signature can be any name or mark used to sign the paper (§3-401). Loans secured by a house or a car are different: the mortgage or lien paperwork has its own signing and recording rules.
What a notary adds: easier proof. A notarized signature is easier to prove in court. Under the federal rules, a document with a notary's certificate of acknowledgment is "self-authenticating", so nobody has to testify that the signature is real (Federal Rule of Evidence 902(8)). Hawaii, Iowa, Kansas, Minnesota, Montana and South Dakota have the same rule in their own evidence law. In California, a notary's certificate is "prima facie evidence" that the signature is genuine (Evidence Code §1451). Even without a notary, in a lawsuit on a note each signature is treated as genuine unless the borrower specifically denies it (UCC §3-308).
A loan repaid over more than a year generally must be in writing. Under the "statute of frauds", most states enforce an agreement that can't be completed within one year only if there's a writing signed by the person who owes (California Civil Code §1624 is a typical example). Mississippi uses fifteen months instead of one year. North Carolina, Louisiana, New Jersey and Pennsylvania have no one-year rule; in Louisiana, an unwritten contract worth more than $500 must instead be proved by a witness plus other evidence (Civil Code art. 1846). Courts read the rule narrowly: if the loan could be paid off within a year, it usually doesn't apply.
Four states want certain loans in writing, whatever their length. Connecticut: any loan over $50,000 (§52-550). Virginia: any promise to lend $25,000 or more (§11-2). South Dakota: any agreement for a loan of money, except loans made under two specific state laws (SDCL 53-8-2). Alabama: any agreement to lend money, except consumer loans under $25,000 (Ala. Code §8-9-2). The Alabama law doesn't say whether a family loan counts as a consumer loan, so whether a family loan under $25,000 is exempt there is unsettled.
Say what the borrower received. Alabama and Minnesota want the writing to state the consideration, meaning what the borrower got for the promise (for example, "for $5,000 lent to me"). Clause 2 of this template does that.

For a large loan, or one secured by a car or a home, a lawyer can review the agreement before you both sign.

If it's never repaid

If the loan was real and becomes totally worthless after reasonable steps to collect, the lender may be able to claim a nonbusiness bad-debt deduction, as a short-term capital loss (IRS Topic 453). If it was really a gift from the start, there's no deduction. See loan or gift? and how to lend money to family legally.

General information, not legal or tax advice. Tax figures checked on IRS.gov and the tax code, 2026-09-27; state rules checked on the states' official code sites, 2026-09-27; the AFR changes every month. Free tax help: IRS Volunteer Income Tax Assistance (VITA) and Low Income Taxpayer Clinics.

Sources

Sources checked 2026-09-28.

General information, not legal or financial advice. You send every message yourself; we never contact anyone on your behalf.