Unsecured loan agreement

About this document

An unsecured loan is used when the lender is confident that the borrower will repay.

The main reasons to record the terms in a document are to prevent a disagreement later, and to allow the lender to seek recourse if the loan is not repaid.

This document could be used for loans:

• between family members or friends

• between a company and a director

• between a partner and a partnership business

If you are a director or shareholder, lending to or borrowing from your company, then a written agreement will ensure the arrangement is clear to other directors, shareholders and HMRC.

The purpose of the loan does not affect the terms of the agreement. You could be lending a friend money for short-term expenses, such as wedding costs, or to a business on a longer term.

Contents

This agreement contains all the terms you would expect as standard in this type of unsecured agreement:

• Structure of the loan

• Alternative draw down arrangements

• Provisions of information to lender

• Repayment and interest payment arrangements

• Method of payment

• Provision for default situations

• Borrower's warranties

• A round up of legal matters

Drawn outside the Consumer Credit Act 1974, this agreement is not suitable for companies in the business of lending or providing credit to consumers.