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Loan Agreement 2024 (guide + free template)

This post covers everything you need to know about the loan agreement

Few people sail through life without borrowing.


Americans owe $222 billion in personal loan debt in 2023 and 22.5 million Americans have a personal loan.

The bad news?

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57.6% of LendingTree users seek personal loans to pay down debt.

Can you imagine that?

A person is taking a loan to pay a loan?

That’s made lending money a very huge financial commitment and you need a very stable legal process in place to produce positive results on both sides.

How can you handle that?

It is through a detailed Loan Agreement.

Drafting an effective loan agreement is a huge legal responsibility and drafting a dumb agreement is like you are telling your money R.I.P.

To help you legally formalize your loan process, I will guide you through

  • What is a loan agreement
  • types of a loan agreement
  • Why do you need it?
  • When do you need a loan agreement
  • How do you write a loan agreement?
  • Loan agreement template
  • etc.

let’s get started

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What is a loan agreement

A loan agreement is a written binding contract between a lender and borrower in which the lender gives the borrower money in return for repayment plus interest.

This agreement set terms and conditions that safeguard the lender in the event that the borrower defaults on the loan, together with any associated interest and fees.

If you prefer simple agreements for loan and payment issues you may use A debt acknowledgment letter or A promissory note for payment, they both work great.

Related: Debt settlement agreement (guide + free sample)

Types of a loan agreement

The following are different types of loan agreements based on the purpose

  • Personal loan Agreement- Between individual’s friends or family
  • Business loan Agreement- for startup, expansion, or new equipment
  • Car Loan Agreement- for car purchase
  • Student loan Agreement – for academic expenses
  • Real estate loan Agreement – for real estate purchases and down payments
  • etc.

Why do you need a loan agreement?

You need a loan agreement to lay out the terms and conditions of a loan process.

This agreement will help you define

  • Amount of money borrowed
  • Interest rate (if any)
  • mode of payment
  • Date of loan
  • Date of last payment
  • Your Rights, duties, and responsibilities
  • Acts as evidence in case the issues will be taken to court
  • etc.

When do you need a loan agreement?

The following are the circumstances in which you will need a loan agreement to safeguard the loan process

  • When you want to outline the conditions of the loan you are offering to an individual
  • When you want to specify the terms of a loan you are borrowing from an individual.
  • When you need to create an amortization schedule for the loan with Interest rates.
  • When you want to know how much the loan’s monthly payments will be.
  • When you need to be strict with the payment timeframe
  • etc.

How do you write a loan agreement?

To write a legally accepted loan agreement you have to clearly outline the terms and conditions of the transaction so that both the lender and borrower are aware of what they are signing.

To be enforceable your agreement must comply with state and federal laws designed to prevent illegal or excessive interest rates on repayment.

The following are the things that you should write in your agreement

  1. Title of the document
  2. Date of the agreement
  3. the names and addresses of the lender
  4. the names and addresses of the Borrower
  5. Loan amount
  6. Interest
  7. Security (if any)
  8. Payment terms
  9. Termination clause
  10. Governing law clause
  11. signatures of the lender and borrower
  12. Witnesses/ notary

Loan agreement template

The following is the template for a loan agreement between individuals


THIS LOAN AGREEMENT made this ………. day of…… 20… 


A AND B of ……. (hereinafter called “the Lender”) of the one part


X AND Y of ……………….. (hereinafter called “the Borrower”) of the other part:


  1. The Lender hereby lends to the Borrower at the Borrower’s request the sum of $…………….. (Sum in words) on the terms stated hereunder.
  2. The duration of the loan shall be a minimum of ……..months and a maximum of………months with effect from the…… of……, 20…
  3. The principal amount of the loan shall be levied interest at a rate of …%  per month, that is to say…………..(sum in words) per month, payable at the expiry of every month of the loan period.
  4. If the Borrower is late by more than………..days for any payment due, it shall be considered late. If a payment is late, the Borrower shall be charged a late fee of …………
  5. As security for the loan, the Borrower hereby mortgages to the Lender the property comprised in …………..  registered under Title Number………………and as evidence of the said mortgage, the Borrower hereby deposits the original copy of the respective Certificate of Occupancy with the Lender who hereby acknowledges having received the same.
  6. If any provision of this Agreement or the application thereof shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entities, or circumstances shall be affected, thereby, but instead shall be enforced to the maximum extent permitted by law.
  7. This Agreement shall be construed and governed by the laws located in the state of _________ (“Governing Law”).

IN WITNESS WHEREOF the parties hereto have set their hands hereunto and respectively signed these presents the day, month, and year hereinafter appearing.

Lender’s Signature: ____________ Date:……..

Borrower’s Signature: ____________ Date:……..

Notary Public

On this ________________, before me, the undersigned, a Notary Public for said State, personally appeared A AND B, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to within the instrument and acknowledged to me that he executed the same in his capacity and that his signature on the instrument, the individual, or person upon behalf of which the individual acted, executed the instrument.

WITNESS my hand and official seal.



My Commission Expires: _________________


The Guarantor, known as [GUARANTOR’S NAME], agrees to be liable and pay the Borrowed Amount, including principal and interest, in the event of the Debtor’s default. The Guarantor agrees to be personally liable under the terms and obligations of the Debtor in this Agreement.

Guarantor’s Signature: _____________________ Date:_____________

Print Name: _____________________

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Isack Kimaro
Isack Kimaro

Isack Kimaro, a lawyer, Creative Writer and self-taught SEO expert has been a prominent author of law-related topics since 2017. Through hard work, dedication, and a relentless pursuit of knowledge, Isack has successfully navigated the legal industry by providing valuable and easy-to-understand legal information to 500,000+ individuals of all levels of understanding.