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IOU Form basics

“I Owe You(s)” or IOUs are often thought of as informal loan agreements, but both the lender and the borrower can benefit from having a written and signed agreement. Sometimes IOU Forms are called Debt Acknowledgment Forms, but they perform the same function.


Use the IOU Form document if:

  • You are loaning a person money and want a record of the agreement.
  • You are accepting a loan from someone and want the terms in writing.
  • The loan includes interests and payment information that needs to be outlined.

A signed IOU Form shows the lender that the borrower is, in good faith, planning on paying back the loan. And if they don't, they have a legal document that can be used to recover what is owed to them.


Other names for this document:


I Owe You Form, Debt Acknowledgement Form


What should be included in an IOU agreement?


If you want more than just a handshake to define the terms of the loan, you'll want to make a written IOU agreement that at least includes the names of the people involved, the loan amount, signatures and the date. But unless the loan is small, you'll likely want to include more such as:

  • Contact information
    Names, addresses and phone numbers for the lender and borrower.
  • Payment information
    The amount of the minimum payment, payment due dates, late dates, late fees and interest rates. What is allowed as acceptable payment such as cash, bank deposit, online payment or other. Terms of early pay-off if needed.
  • Termination details
    What happens if the loan is not repaid according to the agreement. It may include taking possession of collateral, acceleration of debt (full balance due in full) and collection costs.

Does an IOU contract need witnesses or to be notarized?


Not all states require other witnesses to sign the contract for it to be enforceable, but if the loan is large it is recommended. It's simple to find notary services in your area and often your bank or credit union has one on staff. It may be free or low-priced depending on the services you use.


Why do I need a formal IOU Agreement?


Some may worry that formal paperwork might put a strain on good relationships, such as family members or good friends loaning money. However, many more relationships have been damaged by someone not paying back a loan than someone asking for a written agreement. It is in everyone's best interest to make the IOU contract. The only time a lender does not need an agreement is if they are 100 percent willing to let the money or property go whether they get paid or not.

One of the biggest negative sides to personal loans not being repaid is the strain it puts on the relationship and even other related parties. Friendships can dissolve and family gossip can flare up from loan situations that go sour. Not only does the IOU provide security for the lender, but it also gives the borrower a minute to pause and reflect on whether the risk of taking on the loan is worth ruining relationships if they can't pay it back.

IOU forms are simple to make, add an extra layer of protection for the lender and clearly define the terms of the agreement to the borrower. And if the loan is large, it can generate much more confidence than a verbal agreement.


Sample IOU Form

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IOU Form basics

A signed IOU Form shows the lender that the borrower is, in good faith, planning on paying back the loan. And if they don't, they have a legal document that can be used to recover what is owed to them.


Other names for this document:


I Owe You Form, Debt Acknowledgement Form


What should be included in an IOU agreement?


If you want more than just a handshake to define the terms of the loan, you'll want to make a written IOU agreement that at least includes the names of the people involved, the loan amount, signatures and the date. But unless the loan is small, you'll likely want to include more such as:

  • Contact information
    Names, addresses and phone numbers for the lender and borrower.
  • Payment information
    The amount of the minimum payment, payment due dates, late dates, late fees and interest rates. What is allowed as acceptable payment such as cash, bank deposit, online payment or other. Terms of early pay-off if needed.
  • Termination details
    What happens if the loan is not repaid according to the agreement. It may include taking possession of collateral, acceleration of debt (full balance due in full) and collection costs.

Does an IOU contract need witnesses or to be notarized?


Not all states require other witnesses to sign the contract for it to be enforceable, but if the loan is large it is recommended. It's simple to find notary services in your area and often your bank or credit union has one on staff. It may be free or low-priced depending on the services you use.


Why do I need a formal IOU Agreement?


Some may worry that formal paperwork might put a strain on good relationships, such as family members or good friends loaning money. However, many more relationships have been damaged by someone not paying back a loan than someone asking for a written agreement. It is in everyone's best interest to make the IOU contract. The only time a lender does not need an agreement is if they are 100 percent willing to let the money or property go whether they get paid or not.

One of the biggest negative sides to personal loans not being repaid is the strain it puts on the relationship and even other related parties. Friendships can dissolve and family gossip can flare up from loan situations that go sour. Not only does the IOU provide security for the lender, but it also gives the borrower a minute to pause and reflect on whether the risk of taking on the loan is worth ruining relationships if they can't pay it back.

IOU forms are simple to make, add an extra layer of protection for the lender and clearly define the terms of the agreement to the borrower. And if the loan is large, it can generate much more confidence than a verbal agreement.

Use the IOU Form document if:
  • You are loaning a person money and want a record of the agreement.
  • You are accepting a loan from someone and want the terms in writing.
  • The loan includes interests and payment information that needs to be outlined.
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