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IOU Template

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​[Lender.FirstName][Lender.LastName][Borrower.Company]​

Prepared for:

​[Borrower.FirstName][Borrower.LastName][Borrower.Company]​

An “I Owe You,” commonly known as an IOU, is a simple agreement made between two parties who need to establish the terms of a loan. Typically, these sorts of loan agreements are used between parties who are familiar with each other, e.g., family, friends, or business partners. This template is a standard IOU agreement that you can use and customize as needed.

Parties Involved

This Agreement is entered into on [Document.CreatedDate] by and between:

Borrower:[Borrower.FirstName][Borrower.LastName] (“Borrower”), with a mailing address of [Borrower.StreetAddress], [Borrower.City], [Borrower.State][Borrower.PostalCode], and

Lender:[Lender.FirstName][Lender.LastName] (“Lender”), with a mailing address of [Lender.StreetAddress], [Lender.City], [Lender.State][Lender.PostalCode].

The Terms of the Loan

The Lender agrees to lend to the Borrower under the following terms:

Principal Amount:($amount being borrowed)

Interest Rate:(interest rate)% compounded per: Month/Day/Year

Date Borrower Will Receive Borrowed Funds:(Date)

Collectively, this will hereinafter be known as the “Borrowed Funds.”

Not all lenders want to be compensated for the loan, especially in cases of loans for family or friends. However, if you’re a lender and you do want to be compensated for the loan you’re providing, you can specify the interest rate that will apply to this loan.

Payment Schedule

The Borrower agrees to repay the entire balance of the Borrowed Money to the Lender, including all accrued interest and any other fees or penalties, under the following agreement:

A Lump Sum Payment.

The Borrower shall make a lump sum payment to repay the Borrowed Money in full, in the amount of $(amount including principal and interest) by (“Due Date”).

Installments.

The Borrower shall pay principal and interest installment amounts equal to ($amount) with the first payment beginning on (date) and the remaining payments to be paid: (choose one of the installment options below and delete the others)

Weekly with any remaining balance payable on (“Due Date”).

Monthly with any remaining balance payable on (“Due Date”).

Quarterly with any remaining balance payable on (“Due Date”).

(Delete the payment arrangement, e.g., Lump Sum or Installments, that doesn't apply to your specific IOU agreement)

There are pros and cons of both lump sum payments and installment payments for both the borrower and seller, but the ultimate decision comes down to each individual situation. You can customize this template to make it work best for you by deleting irrelevant sections.

Guarantor

​[Guarantor.FirstName][Guarantor.LastName] ("Guarantor") agrees to guarantee to the Lender the full payment of the Borrowed Amount should the Borrower be unable or unwilling to repay the Borrowed Amount. The Guarantor agrees that this guarantee will remain in full force and effect until this Agreement is complete and the Borrowed Amount has been fully repaid.

A guarantor or cosigner is responsible for paying back a loan if the borrower is unable to. This provides an extra measure of protection for the lender. Having a guarantor isn’t required, but it may be requested by the lender, especially if there are concerns about the borrower’s ability to repay the loan.

Additional Terms

Successors and Assigns.

This Agreement will inure to the benefit of and be binding on the respective successors and permitted assigns of the Borrower. The Borrower may not assign its rights or delegate its duties under this Agreement without the Lender’s prior written consent.

Joint and Several Liability.

If there is more than one Borrower, the obligation of each Borrower shall be joint under the terms of this Agreement.

Amendments.

This Agreement may not be amended or modified in any way except by express written consent of both the Borrower and Lender.

Severability.

If any of the provisions of this Agreement are held to be invalid or unenforceable in part or whole, the remaining provisions shall not be affected and shall continue to be valid and enforceable.

Governing Law.

This Agreement shall be governed by and construed by the laws of the State of (state name).

Signatures

This Agreement shall be governed by and construed by the laws of the State of (insert state).

​

Signature
MM / DD / YYYY

​

Signature
MM / DD / YYYY

​[Borrower.FirstName][Borrower.LastName]​

​[Borrower.Company]​

​[Lender.FirstName][Lender.LastName]​

​[Lender.Company]​

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FAQ

  • The easiest way to write an IOU letter template is to start with the essential details, such as the parties involved, the amount being borrowed, and the terms of the loan, like the interest rate and payment schedule. Then, you can add details like whether or not there will be a guarantor. To complete your IOU letter faster, you can use this free template which incorporates all of these important elements.

  • Written IOUs are legal and can be introduced in a court of law, but their ultimate enforceability will come down to each court. Regardless, you’ll want to make sure you incorporate the most important details that are required for an IOU to be legally effective. This IOU template is a great place to start.

  • An IOU does not need to be notarized, but some legal authorities feel that notarizing IOUs makes them more official and more likely to be enforced. A notarized IOU is similar to a promissory note, which is a more official and legally binding document.

  • IOUs and promissory notes are different forms used to acknowledge a debt between two parties and layout payment terms. An IOU acknowledges the debt agreement between the borrower and the lender but doesn’t necessarily go much further than simply recording it. Promissory notes are more official documents that establish the debt and lay out the terms of payment in greater detail. 

  • An IOU is an acknowledgment of a debt that a borrower owes a lender, but the agreement itself is not considered cash. Some examples of cash equivalents are bank drafts, money orders, and checks. 

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IOU Template

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A simple agreement called an IOU is created between two parties that need to specify the terms of a loan. This template is a typical IOU Template that you can use and customize as necessary.

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