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LOAN AGREEMENT

THIS LOAN AGREEMENT (this "Agreement")  dated this ________ day of ________________, ________

BETWEEN:


____________________ of ______________________________________
(the "Lender")

OF THE FIRST PART

AND


____________________ of ______________________________________
(the "Borrower")

OF THE SECOND PART

IN CONSIDERATION OF the Lender loaning certain monies (the "Loan") to the Borrower, and the Borrower repaying the Loan to the Lender, the parties agree to keep, perform and fulfill the promises and conditions set out in this Agreement:

  1. Loan Amount & Interest
  2. The Lender promises to loan $____________________USD to the Borrower and the Borrower promises to repay this principal amount to the Lender, without interest payable on the unpaid principal, beginning on July 7, 2026.
  3. Payment
  4. This Loan will be repaid in consecutive monthly installments commencing on July 7, 2026 and continuing on the seventh of each following month until July 7, 2026 with the balance then owing under this Agreement being paid at that time.
  5. At any time while not in default under this Agreement, the Borrower may make lump sum payments or pay the outstanding balance then owing under this Agreement to the Lender without further bonus or penalty.
  6. Default
  7. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing under this Agreement at that time to be immediately due and payable.
  8. Governing Law
  9. This Agreement will be construed in accordance with and governed by the laws of the State of Ohio.
  10. Costs
  11. The Borrower shall be liable for all costs, expenses and expenditures incurred including, without limitation, the complete legal costs of the Lender incurred by enforcing this Agreement as a result of any default by the Borrower and such costs will be added to the principal then outstanding and shall be due and payable by the Borrower to the Lender immediately upon demand of the Lender.
  12. Binding Effect
  13. This Agreement will pass to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender. The Borrower waives presentment for payment, notice of non-payment, protest, and notice of protest.
  14. Amendments
  15. This Agreement may only be amended or modified by a written instrument executed by both the Borrower and the Lender.
  16. Severability
  17. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
  18. General Provisions
  19. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
  20. Entire Agreement
  21. This Agreement constitutes the entire agreement between the parties and there are no further items or provisions, either oral or otherwise.

IN WITNESS WHEREOF, the parties have duly affixed their signatures on this ________ day of ________________, ________.

SIGNED, SEALED, AND DELIVERED
this ________ day of ________________, ________.


 


_____________________________
____________________


SIGNED, SEALED, AND DELIVERED
this ________ day of ________________, ________.


 


_____________________________
____________________

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Last updated June 29, 2026

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What is a Loan Agreement?

A Loan Agreement is a contract between a lender and a borrower that sets out the loan amount, repayment terms, due dates, and each party's obligations. It’s an essential document that creates a legally enforceable record of the loan and its terms.

A Loan Agreement is also known as a:

  • Lending agreement
  • Lender agreement
  • Lending contract
  • Loan contract

LawDepot’s Loan Agreement template is available to create a customized agreement for all US states.

Types of Loan Agreements

The type of Loan Agreement you create will reflect the relationship between the lender and borrower. Common types of contracts include:

  • Personal Loan Agreements: A contract used between family or friends who want to have clear documentation for avoiding tension when lending money.
  • Business Loan Agreements: A contract between a lender and a business (e.g., for a startup or financial assistance) that may include more formal terms like collateral.

Our Loan Agreement template allows you to create a contract for both business and personal loans to fit your unique needs.

Loan Agreements vs. Promissory Notes

A Loan Agreement is ideal for complex or high-value loans (e.g., larger sums being lent), where a Promissory Note is more suitable for simpler, low-risk lending (e.g., a small, short-term loan to a trusted family member). 

Here is a comparison of the two:

Feature

Loan Agreement

Promissory Note

Detail

Includes detailed terms and is typically used for more complex lending.

Usually simpler and focuses on the promise to repay.

Flexibility

More adaptable format for complex or customized loan arrangements.

Typically used in a simpler, more standardized format.

Legal recourse

An enforceable contract with broader options if payments are missed. 

An enforceable promise to repay, used as proof of the debt.

Loan Agreements vs. Mortgages

A Loan Agreement is a broader contract for borrowing money (e.g., for a business, a vehicle, or school). 

A Mortgage Agreement is a specific type of contract used for purchasing real estate, with the property serving as collateral. This means the lender can take possession of the property if the borrower defaults on the payments. 

When to use a Loan Agreement

Use a Loan Agreement whenever you lend or borrow money to define the terms and clearly protect all parties. Instances to use an agreement include:

  • Personal lending between family or friends to help with debts or bills.
  • Business transactions, such as securing capital for a startup.
  • Financing a large purchase such as a vehicle, boat, or piece of furniture.
  • Borrowing for a down payment on real estate.
  • Student loans for tuition or other education expenses.

Benefits of using a written Loan Agreement

Having a Loan Agreement in writing protects lenders by legally enforcing the borrower’s obligation to repay the loan in regular payments or lump sums. Other benefits include:

  • Creating clarity to prevent misunderstandings by outlining essential terms and payment schedules.
  • Providing evidence and documentation as proof of the loan for legal or tax purposes.
  • Protecting relationships by setting clear expectations, helping preserve personal or professional relationships.

What’s included in a Loan Agreement?

Key components to create a valid Loan Agreement include:

  • Lender and borrower details
  • Loan amount, date, and purpose
  • Interest rate, if applicable
  • Repayment method and schedule
  • Fees and penalties for late or missed payments
  • Which state’s laws will apply to the agreement (governing law)
  • Any collateral, if applicable

You can include additional details, such as adding a co-signer to provide additional security. LawDepot’s template also includes standard legal provisions, such as acceleration and severability clauses, to provide crucial protection. 

How to write a Loan Agreement

Use LawDepot’s Loan Agreement template to have a downloadable PDF that you can save and print for your loan. Simply select if you are lending or borrowing money, and complete the following steps:

    1. Choose the purpose of your loan (e.g., business, debts, bills, real estate, or a vehicle).
    2. Select where you live so your contract complies with state laws.
    3. Add the loan details (i.e., amount, interest, and date).
    4. Outline the payment terms (i.e., how the loan will be paid, how often, and the first payment date).
    5. Determine a payment schedule, and if early payments or lump sums are allowed.
    6. Specify any penalties for late payments, if applicable.
    7. Give both parties’ details (i.e., name and address).
    8. Name a co-signer or add any collateral that may apply.
    9. Add a space for a witness signature, if applicable.

Mistakes to avoid when making a Loan Agreement

Some common mistakes to avoid when writing a Loan Agreement include:

  • Using vague terms and language
  • Missing interest details that may be essential for tax purposes
  • Using unfair interest or terms that may be deemed “predatory”
  • Missing signatures from one or both parties

Our template will prompt you only to include the necessary information to create a valid contract for your loan.

Loan Agreement FAQs

Can I write my own Loan Agreement without a lawyer?

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Yes, you can write your own Loan Agreement using LawDepot’s user-friendly template. 

Talk to a lawyer if you have any questions or wish to have your contract reviewed before signing.

Are Loan Agreements legally binding?

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Yes, Loan Agreements are legally binding when they have all the elements of a valid contract (i.e., an offer, acceptance, and consideration). Having a written agreement is easier to prove than a verbal contract and helps provide evidence if concerns or disputes arise.

A court may refuse to enforce a contract if there is evidence of fraud, illegal or unconscionable terms (e.g., illegal interest rates), lack of capacity, or the agreement was signed under duress.

Do I need to notarize my Loan Agreement?

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Notarization is not required for a Loan Agreement. However, signing a contract in front of a notary public can help better validate both parties’ signatures and give credibility to the document if a dispute arises.

Alternatively, having a witness (i.e., a neutral third party) present when signing can help validate both parties’ signatures.

LawDepot’s Online Notary services allow you to meet with a notary public from anywhere in the US to save time and travel to complete the signatures on your document. 

What is the difference between a secured and an unsecured loan?

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The difference between a secured loan and an unsecured loan is the use of collateral to help protect the lender. 

  • Secured Loan Agreements are used when collateral assets back a loan. Collateral helps ensure repayment. If a borrower doesn’t repay a loan, the lender can take steps to obtain and sell the collateral to help recover what is owed.
  • Unsecured Loan Agreements are used for loans without collateral assets. If a borrower doesn’t repay a loan, the lender may seek to collect the debt through various methods available at law, which may include court action.

LawDepot’s Loan Agreement template can be used for both secured and unsecured loans.

Should I charge interest on a loan?

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Whether you charge interest as a lender will depend on your relationship with the borrower. A lender isn’t legally required to charge interest on a personal loan. However, interest can assist with:

  • Risk compensation: Charging interest compensates the lender for the risk they take when lending money.
  • Inflation protection: Interest helps to ensure that the value of the money you lend is not eroded by inflation over time.
  • Tax implications: In some jurisdictions, failing to charge a minimum interest rate can have tax consequences. Therefore, it's advisable to consult a tax professional about the implications of interest-free loans.

How to determine fair interest rates

For personal loans, the Internal Revenue Service (IRS) sets minimum interest rates for below-market personal loans above $10,000. Still, setting a rate can be challenging. Here are some guidelines: 

  1. Assess the risk: A higher interest rate may be reasonable for higher-risk loans (e.g., no collateral, no co-signer, or a borrower with a poor credit score).
  2. Check legal limits: Many jurisdictions have usury laws that cap the maximum interest rate you can legally charge a borrower. Check your state’s usury laws to understand the limits that may apply in your area.  

What happens if a borrower doesn't repay a loan?

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If a borrower defaults on their payments, different steps may be available to the lender. Many Loan Agreements explain what happens if a payment is late or missed, including any late fees or other penalties. After following the steps described in the agreement, some lenders send a formal Demand Letter that asks the borrower to pay the overdue amount.

If attempts to collect payments are unsuccessful, you may be able to take legal action, depending on state laws and what is provided in your original agreement. Possible remedies can include having a co‑signer assume responsibility for the payments or, under a secured agreement, enforcing rights against any collateral (for example, arranging for its seizure and sale through the proper legal process).

If you need help or guidance with retrieving outstanding payments, consult a lawyer.

Can I extend my Loan Agreement?

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Yes, a Loan Agreement can be extended. In many cases, people use a Contract Addendum to amend the existing agreement. All parties must agree to any changes being made and sign the amendment.

However, if the changes are more complex, creating a new agreement may be a better option.

Related Documents:

Loan Agreement

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