These loan agreement templates let you document lending of any amount by and to individuals, business partnerships and companies. There may be no security, or the borrower may give a personal guarantee, or secure against physical goods or financial assets.
Whether you wish to formalize lending money to a family member for a deposit on a property, or help a business partner with short-term cash flow issues, or record a loan between subsidiaries, we have a template that suits.
This agreement aims to bridge the gap between not using a document at all, and using a longer, more comprehensive one.
It makes clear to the borrower that the loan is to be repaid.
Despite its simplicity, the document is legally binding. You can take action if the borrower doesn't pay on time, or uses the money for a reason not agreed.
It is suitable for situations such as lending to a friend or family member:
This is a simple agreement where the lender does not require security, perhaps because the borrower is certain to repay or perhaps because risk is priced into a higher interest rate.
Either or both parties could be a person or a company, making this agreement suitable for lending:
This agreement covers the specific situation of a loan of money to family or friends for the purpose of helping to buy a house or flat, or for a property renovation project.
Even when you trust the person to whom you lend, you should record the agreement in writing.
By using this document, you should avoid confusion about whether the money was a gift or a loan, and the terms or borrowing. This is particularly important for lending to more than one person where there is a risk the relationship between the borrowers may not last, or where the property is jointly owned with someone other than the borrower.
For a loan secured against tangible assets of any size and type, such as a car, stock, equipment or fixed plant.
Suitable for lending to someone for purposes such as:
The document includes optional provisions for:
This agreement brings in a third party guarantor as security for the loan.
The borrower and the lender should both be individuals.
Use for loans to family and friends, as well as for arms length business deals.
For a loan secured against assets such as company shares, the right to receive another debt, or intellectual property rights.
Suitable for lending by an individual or a company to an individual or a partnership, for purposes such as:
This is an agreement between a lender, who may be an individual or a corporate body, and a borrower, who is a company or a trust. Security is provided by a personal guarantee of a third party, probably by one or more of the directors.
Example uses include lending:
This agreement is between a lender, who may be an individual or a corporate body, and a borrower, who is a company. The loan is secured on specific physical assets. This is not a fixed and floating charge.
Security could be any physical assets, lodged or described, with options for:
Other optional provisions include:
An agreement between an individual or a corporate body, and a company. The loan may be secured on shares, intellectual property rights or other intangible property.
This agreement strongly protects the lender. If the value of the security falls below a specified level, the lender can call on the borrower to top it up.
Optional provisions include:
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We avoid legal terminology unless necessary. Plain English makes our documents easy to understand, easy to edit and more likely to be accepted.
You don’t need legal knowledge to use our documents. We explain what to edit and how in the guidance notes included at the end of the document.
Email us with questions about editing your document. Use our Lawyer Assist service if you’d like our legal team to check your document will do as you intend.
Our documents comply with the latest relevant law. Our lawyers regularly review how new law affects each document in our library.
A loan agreement (sometimes called a loan contract) is a contract between a lender and a borrower whereby the lender agrees to lend a certain amount of money to the borrower.
By making use of a loan agreement, the lender and the borrower can document their arrangement on, amongst other terms:
purpose of the loan
loan amount
interest payable
duration of the loan (also known as repayment period)
how the borrower will repay the loan (comprising of principal amount and interest payable). For example, the borrower can make monthly or quarterly loan payments (regular payments that go towards the principal and interest), pay the total amount on a set date before the maturity date (lump sum, with the option for lump sum payments, meaning the borrower can make full or partial lump sum payments toward the principal without penalties), or the borrower can follow a repayment schedule (regular loan payments or lump sum payments)
security against the loan
circumstances in which the loan becomes payable immediately
The agreement also sets out the obligation of the borrower repaying the loan under the agreed terms and conditions, ensuring legal enforceability.
Loans come in various forms, each designed to meet different financial needs and circumstances. The most common types include personal loans, business loans, secured loans, and unsecured loans. Personal loans are typically used by individuals for personal expenses, such as home improvements or consolidating debt, while business loans are intended to help companies manage cash flow, invest in growth, or cover operational costs.
A secured loan requires the borrower to provide collateral, such as property or equipment, which the lender can claim if the borrower defaults. In contrast, an unsecured loan does not require collateral but may come with higher interest rates due to increased risk for the lender.
Every loan agreement, regardless of type, is a binding contract that sets out the loan amount, interest rate, and repayment schedule, ensuring both parties understand their rights and obligations. Choosing the right type of loan and corresponding agreement is essential for protecting both the lender and the borrower throughout the repayment process.
A simple loan agreement is likely to state:
Borrower: the individual receiving the loan amount and liable to pay it back.
Lender: the individual lending loan amount to the borrower
Principal amount: the full loan amount that the borrower lends, not including any interest charges
Interest: a percentage of the borrowed amount or a fixed sum to be paid to the lender in consideration of making the loan; these are interest charges that may be applied to the loan amount. The interest can be a fixed interest rate, providing predictable and consistent repayment amounts.
Maturity date: the due date for the final payment, when the term of the loan expires and the borrower must have repaid the loan (the principal amount, any accrued interest and fees and expenses)
Some loan agreements may also include origination fees as part of the costs associated with setting up the loan.
A well-structured loan agreement should follow established practice and include these key sections in order: parties’ details (names and addresses), loan amount and purpose, interest rates and calculation method, repayment schedule, security provisions (if applicable), and default conditions.
The document should be tailored to your specific lending scenario. Essential clauses include governing law, dispute resolution, and early repayment terms, with such provision as may be required for early repayment.
Professional templates incorporate these structural elements based on legal expertise, ensuring nothing important is omitted. This systematic approach creates an enforceable agreement that protects both lender and borrower interests to the extent permitted by law.
If there is one contract that should always be in writing, it is a loan agreement.
Regardless of whether you are lending to or from a family member, colleague, or someone you do not know well, it cannot be emphasised enough how important it is to record the loan amount and any terms of the loan in an agreement.
Borrowing any amount of money is a large commitment and it is important that both the lender and borrower are agreed and clear as to terms of the loan. A written agreement protects both the borrower and the lender.
If you are lending to someone you don’t know well, a secured loan agreement records the security against the loan as well as other terms of the loan. It becomes a binding contract that can be proved. This eliminates confusion as to which asset was charged. The agreement also protects the lender's rights and interests in the event of default.
If the borrower defaults or the borrower's failure to meet obligations under the agreement occurs, such as not making timely payments, this constitutes a default. In such cases, the lender may acquire the assets submitted as security and sell them off to realise the loan amount. The borrower's obligations include making repayments on time and complying with all terms set out in the agreement.
If you are lending to a family member or a friend you can use the unsecured loan agreement or the family members and friends loan agreement. The reason to have a loan agreement when lending to family or friends might be to keep your relationship strong rather than to be a contract you want to enforce.
Once a lender agrees and the parties sign a loan agreement, the lender cannot renege and refuse to lend the borrower the sum agreed on the terms set out in the loan agreement. In the event of a dispute or non-payment, the loan agreement provides legal recourse for the lender to enforce the terms in court.
Yes, you can write your own loan agreement in the UK without using a solicitor. There are no legal requirements that mandate professional drafting for private lending arrangements. However, you must ensure the document includes essential elements such as loan amount, repayment terms, and interest rates.
Using a professionally drafted template provides benefits including legal compliance and comprehensive protection for both parties. While DIY agreements are perfectly valid, complex commercial loans or secured lending may warrant professional legal advice to address specific circumstances.
Writing a loan agreement between friends requires careful consideration of the relationship alongside legal protection. Start by documenting basic details: names, addresses, loan amount, and repayment terms. Even informal arrangements benefit from written agreements to prevent future disputes. Include whether interest applies and specify consequences for late payments.
Essential elements include the loan purpose, repayment schedule, and what happens if circumstances change. Consider using a template specifically designed for friends and family lending, which balances legal protection with relationship preservation. Remember, clear documentation strengthens rather than weakens personal relationships.
All our templates are drawn outside the Consumer Credit Act 1974. Whilst that makes them unsuitable for companies in the business of lending or providing credit, for private lending and personal loans they are very flexible, allowing you to make, more or less, the deal you choose.
Our templates are strong in law, favour the lender, and cover a large range of possible transactions.
We have provided many options in most of our templates and written them in plain English. This makes our legal documents easy to understand and edit any commercial terms according to your preference.
Our loan contract templates can be used by any person or organisation (companies, business partnerships, and LLPs) for all forms of private lending.
Use these agreements:
For short- or long-term lending
Regardless of where the two parties are: UK or abroad
For loan amount of any size, and with repayment terms of any complexity
When lending money to an individual, company, business partnership, or a LLP
When borrowing money from another business
To create a promissory note that can be recognised as an asset
For a very simple loan agreement that has no guarantor and no security, you should use the unsecured loan agreement: person to person; private or business.
For a personal loan to a member of your immediate family, a friend, or a relative, use the personal loan agreement template for lending to friends and family.
If you want to include a guarantor (which could be a life partner, parent, or a relative) to guard against non payment, you should use the person to person loan agreement secured by guarantee.
If you are an individual or a company lender and your borrower promises and agrees to pledge his or her shares, other financial assets or intellectual property as security, you should consider the value of the assets being pledged as collateral, as this value directly affects the lender's rights and the security of the loan. Maybe he wants to borrow money to use for his company but you are only willing to lend money to him personally. In this case, you should use the loan agreement for individual borrower that is secured on financial assets.
In other cases, your borrower might be a private individual who wants to borrow money to buy a university education or stock for his business and gives security over his physical assets. In such a case, you should use the loan agreement for a private borrower secured on physical assets.
If your borrower is a company you should always use a secured loan agreement. Further, you need to provide for authority to enter into the deal, promise not to change the structure or other matters related to company law. These terms are already provided in our loan agreement templates.
If the borrower is a company, you should use the loan agreement for loan to company where the directors personally guarantee repayment of the loan.
In other cases, you may want provisions for security provided by financial instruments or other intellectual property. The security should be shares or some other property that can be sold easily. In this case, you should use a loan agreement for loan to company that is secured on financial instruments.
Conversely, you may want the company borrower to secure the loan against physical assets of the company (something that is not 'fixed to the land'). For these types of loans you should use loan agreement for company borrower that is secured on physical assets and preferably include a guarantor.
Each template is drawn for circumstances that differ slightly from the others, so the terms in each vary. But be assured - all of the templates include the loan terms appropriate for their purpose.
Note that we provide extensive guidance notes with every loan contract that explain each paragraph in the contract in detail. Our templates include, amongst others, the following terms:
Almost all the templates provide for guarantors – even if the loan amount is secured against other assets as well.
In most cases, a guarantee is much more effective than other types of security because non-repayment risks a relationship and the reputation of the guarantor as well as of the borrower. Even if the borrower's credit history is impeccable, a guarantor could be brought in.
Additionally, in most situations, the lender only needs to satisfy themself that the guarantor has sufficient assets overall and passes a credit check, and therefore doesn’t have to perform detailed valuations of individual items offered as security.
We strongly advise that you insist on a guarantor when you lend to a company. The guarantor should be one or more directors of the company. Remember that a guarantee is far more effective if it includes the spouse or life partner of a director.
The time period during which the amount is lent can be any you choose. There are no legal consequences if the term is long or short: no notices, no special registrations.
We suggest that the repayment period is a specific time period, such as one year, rather than conditional on another event, such as a student loan application being accepted. The problem with a conditional event is that even if it is certain to happen, the two parties may not have the same expectations as to the timing at the outset. As obvious as it sounds, a fixed term loan is certain to meet the timing criteria to be repaid.
There is no limit in law on the interest rate or the total interest amount that the lender may charge. The lender may also charge interest on the loan under the terms agreed by both parties. It can be whatever the two parties agree. It could be fixed for the duration, or variable from one time period to another depending on another factor (such as a bank rate). It could be reduced for prompt payment.
In our templates we have optionally provided for a greater rate of interest (effectively a late fee) if the debtor falls behind with regular repayments.
Interest could be accrued and this accrued interest paid at the end of the term, or it could be payable in regular payments (e.g. monthly). In cases of default or late payment, accumulated interest continues to build up over time and may be added to the outstanding balance. Deferment is more common if the sum borrowed is to be spent on a project that realises a large return at the end of the term, and the principal and interest are paid together.
Our templates provide option that the borrower repay the loan in a staggered approach.
All our templates provide strong protection for the person or party lending the money. This applies more to those documents where the reason for lending is a business one rather than to help family or friends. We take the simple view that since the money is not a gift, everyone expects it to be repaid.
If you are lending to a family member it is unlikely that you will want to bankrupt them if the borrower fails to make a repayment. However, in a business deal, remember that if the business goes down, a dispute as to entitlement is more likely to be against a liquidator or receiver than against the shareholder-director who took on the debt. That is why we make the terms of these loan agreement templates so strong - we hope that you never have to, but you might need to take legal action to recover the principle. In such cases, the borrower may be responsible for any costs incurred by the lender in enforcing the agreement, and such costs, including legal fees, can be added to the outstanding amount owed.
In a secured loan, the borrower promises to put up a property or assets as collateral. So if the borrower defaults, the lender's position is secured as he can use the collateral to realise the outstanding loan amount.
Physical goods can provide sound security because the lender should be able to acquire them and sell them easily if the borrower defaults. Of course, goods that can be removed easily provide better collateral than those that require specialist equipment to move them.
In these loan agreement templates, the sum lent can be secured either by taking physical possession of the assets at the outset, or by leaving them in place and describing them in detail in the agreement. The loan agreement provides the evidence that the item is secured.
You can read further about security. Our guidance notes to each agreement also discuss it in detail.
For larger loans, you might consider requiring insurance to protect against default due to unforeseen circumstances.
There are standard clauses in each template that regulate the contract. For example, that the document constitutes the entire agreement between the parties, superseding any prior discussions or arrangements and specifying the governing law that applies, ensuring legal enforceability. If any provision of the agreement is found to be invalid or unenforceable, the remaining provisions shall continue to be effective and enforceable.
Yes, a properly executed loan agreement is legally binding in the UK. For enforceability, the agreement must contain essential elements: clear identification of parties, loan amount, consideration (usually interest), and signatures from both parties. The document becomes enforceable once signed, creating legal obligations for repayment. A signed agreement serves as a binding legal document that outlines the repayment schedule, collateral, default conditions, and other contractual obligations necessary to enforce the loan arrangement.
To ensure the validity and authenticity of the agreement, signatures should be duly affixed by all parties. The rights and obligations under the agreement may also be transferred to the respective heirs, executors, administrators, or successors of the parties in the event of death. Compliance with contract law principles ensures validity - there must be offer, acceptance, and consideration. Written agreements provide stronger evidence than verbal arrangements and are easier to enforce through court proceedings if necessary.
Professional templates incorporate required legal elements, ensuring the agreement meets enforceability standards whilst protecting both parties’ interests effectively. In witness whereof, the parties have executed this agreement as of the date their signatures are affixed.
A promissory note is a fundamental document within a loan agreement, serving as the borrower’s written promise to repay the loan amount to the lender. This document outlines key details such as the loan amount, interest rate, and specific repayment terms, making it clear what the borrower agrees to pay and when.
The promissory note acts as a binding contract, providing legal evidence of the borrower’s obligations to repay both the principal and any interest due. In the event of a dispute or if the borrower fails to meet their repayment obligations, the promissory note can be used in legal proceedings to enforce the terms of the loan agreement. Including a promissory note in your loan documentation ensures that both lender and borrower have a clear, enforceable record of the loan and its repayment terms.
Late payment fees are an important aspect of any loan agreement, designed to encourage timely payments and compensate the lender for any inconvenience or financial loss caused by delays. These fees are typically specified in the agreement and may be calculated as a fixed amount or as a percentage of the unpaid amount.
If a borrower misses a scheduled payment, the lender may issue a notice and require the borrower to pay the late fee in addition to any accrued interest on the overdue balance. Understanding the late payment provisions in your loan agreement is crucial, as repeated late payments can increase the total cost of the loan and may impact the borrower’s creditworthiness.
To avoid unnecessary charges, borrowers should review the agreement carefully and ensure all payments are made on time.
The entire agreement clause is a standard provision in most loan agreements, stating that the written agreement represents the complete and final understanding between the parties. This means that any prior discussions, negotiations, or informal agreements are superseded by the terms set out in the signed document. By including an entire agreement clause, both lenders and borrowers can be confident that all key terms and conditions are captured in a single, binding contract, reducing the risk of misunderstandings or disputes over unwritten promises. This clause helps ensure that the loan agreement is the definitive source of the parties’ rights and obligations, providing clarity and legal certainty for everyone involved.
A governing law clause is an essential part of any loan agreement, as it specifies which country’s or region’s laws will apply to the interpretation and enforcement of the agreement. This provision ensures that both parties understand which legal framework governs their rights and obligations, and it can be especially important in cross-border or international loans. By clearly stating the governing law, lenders and borrowers can avoid confusion and potential conflicts, knowing in advance which jurisdiction will handle any disputes that may arise. Including a governing law clause in your loan agreement helps provide legal certainty and ensures that the agreement is enforceable according to the chosen legal system.
If a company borrows an amount of money against security then registration of the charge at Companies House is required, if the lender wants to be given preference over unsecured creditors.
This process does not require you to use a solicitor or law firm.
Bankruptcy and liquidation law is very complicated. There are rules as to the ranking priority order of different creditors. A creditor arrangement where the document is registered at Companies House takes priority over debts which are not registered. Strangely, it is the company that has the legal obligation to register every charge or debt, even though registration protects the creditor.
When the debt is repaid, whether fully or in part, the company has no obligation to inform Companies House. However, it is in the company's own interests that potential investors and lenders are aware that it has satisfied all or part of the debt.
Although we provide explicitly that the company registers the charge, it is best if the lender makes sure this is done. The debt will then be valid against a liquidator or administrator, should the company become insolvent.
Yes, a loan agreement can be enforced in a UK court provided that it is legally valid. To be enforceable, the agreement must include the essential terms we have provided details above. Even informal loan agreements between private individuals (e.g. friends or family) can be enforceable if there is clear evidence of the intention to create legal relations and a genuine loan, not a gift. Written agreements are strongly preferred, as verbal ones can be difficult to prove in court.
If the borrower fails to repay as agreed, the lender can:
Formally demand repayment in writing (often a “letter before action” is sent first);
Consider alternative dispute resolution or mediation;
Proceed to make a claim through the County Court for the outstanding amount, including interest and legal costs where applicable.
A witness is not legally required for a simple loan agreement in the UK.
A guarantor is optional, but can provide an extra layer of security. If the borrower defaults, the guarantor becomes liable for repayment. If your borrower has limited assets or a poor credit history, including a guarantor is a wise step to strengthen your legal position.
