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Loan Agreement

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Loan Agreement

Learn more about Loan Agreement

If you've ever loaned money and not been repaid, you understand the need for a Loan Agreement. A legally-binding Loan Agreement not only maps out the terms of the loan, but it also protects you if the borrower defaults on the loan and fails to pay you back as agreed.

It's easy to make a Loan Agreement on Rocket Lawyer. Just answer a few critical questions, and we'll generate the proper legal language for your contract. Before you write your own Loan Agreement, you should know some of the basic details that are included. For example, you'll need to identify who the lender and borrower are, and you should know the general terms and conditions of your loan, such as, how much money you are lending, and what your expectations are for being paid back.

Our Loan Agreement Form can be used to create a legally-binding agreement suitable for any state. It is simple to use, and it only takes a few minutes to make. Even though it is easy to make the document, you'll need to gather a bit of information to make the process go faster.

  • Contact information
    • Legal name and address of the borrower and the lender.
  • Repayment options
    • You'll need to decide when payments are due or if you want the loan to be repaid in one lump sum. You can also configure the Loan Agreement to include monthly payments with a large balloon payment if you want.
  • Interest
    • Not everyone charges interest on a personal loan, but you can if you want to get paid back more than you loaned. You'll also need to decide how you want the interest paid and if there will be any benefits to the borrower if they pay the loan balance early.
  • Late fees and consequences of defaulting
    • You'll need to decide when payments are considered late and the amount of the late fee if any. If the borrower violates the terms of the agreement, you can define what happens if they default (such as transferring the ownership of collateral to you.)
  • Collateral
    • If someone is looking to borrow money from an individual, they likely do not qualify for a traditional bank loan, so collateral may be used to secure the loan. Typical collateral items include vehicles or real estate.
  • Cosigner
    • A cosigner is someone with good credit who is willing to take over payment responsibility for the loan if the borrower defaults or is unable to pay. A cosigner is often used to secure loans to young people who have not yet established their credit history.
  • Loan sales
    • You can include a provision in the agreement that allows the lender to sell the loan. This option is not extremely common in personal loans, but it is a possibility that you can include.

With a Rocket Lawyer Loan Agreement, you can agree to various types of loan repayment structures including installment payments or a lump sum. Ultimately, the best payment schedule is one that the borrower can manage. With Rocket Lawyer, you have the flexibility to decide which payment schedule will work best for your loan.

If this loan document doesn't fit your needs, we offer other types of loan contracts including:

  • Promissory Note
    • A Promissory Note is similar to a Loan Agreement. However, it is a simpler form and doesn't usually include as many provisions as a Loan Agreement.
  • IOU Form
    • An IOU agreement is a step above a handshake agreement. It is suitable for small personal loans.

If you have questions about making your Loan Agreement, ask a lawyer.

Essentially, a Loan Agreement and Promissory Note serve the same purpose as both being written agreements for loans, but a Loan Agreement typically contains more formalities and is more detailed than a Promissory Note.

Can I write a personal Loan Agreement between family members?

Yes, you can write a personal Loan Agreement between family members. It is important to follow contract formalities to hold both parties accountable. If there is a dispute, it will be difficult to prove the terms of your arrangement without a formal contract. If you've already loaned money and are having a difficult time collecting payments, see How to Collect Personal Debt from a Friend, Family Member or a Business.