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Loan Agreement Template – Free Download 2026

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When Do You Need a Loan Agreement?

You are lending money to a family member, friend, or business associate and need a written agreement that documents the loan amount, interest rate, and repayment schedule to protect both parties and comply with the Statute of Frauds.

Your small business is borrowing money from a private investor or another business, and both parties need a comprehensive agreement that outlines the interest rate, amortization schedule, default terms, and remedies to ensure the arrangement is legally enforceable.

You need to formalize an existing informal loan by putting the terms in writing. The IRS requires documentation of loans to distinguish them from gifts, and a written loan agreement with a stated interest rate at or above the Applicable Federal Rate prevents adverse tax consequences.

A lender has requested that you sign a loan agreement before disbursing funds, and you want to review a template to understand standard terms such as the secured promissory note provisions, acceleration clause, late payment penalties, and prepayment options before negotiating.

You are structuring a business loan with specific conditions such as milestone-based disbursements, financial reporting requirements, or covenants that restrict the borrower's activities, and you need a comprehensive agreement framework.

You want to ensure your loan complies with state usury laws by documenting the agreed-upon interest rate and confirming it does not exceed your state's maximum allowable rate. A written agreement demonstrates good faith compliance.

What Should a Loan Agreement Include?

Party Identification and Loan Amount

Identify the lender and borrower by full legal name and address. State the principal loan amount in both numerals and words. If the borrower is a business entity, include the entity type, state of formation, and the name and title of the authorized signer.

Interest Rate and APR Disclosure

State the interest rate as an annual percentage. Specify whether interest is simple or compound and how it is calculated (daily, monthly, or annual accrual). For consumer loans, the Truth in Lending Act requires disclosure of the APR and total finance charges. Confirm the rate does not exceed your state's usury law limits.

Repayment Terms and Schedule

Define the repayment structure: installment payments (monthly, quarterly, annually), lump-sum payment at maturity, or interest-only payments with a balloon payment. Include the payment due dates, the amount of each payment, and the final maturity date. Attach an amortization schedule if payments include both principal and interest.

Default and Acceleration Provisions

Define what constitutes a default, such as missed payments, breach of covenants, or borrower bankruptcy. Include an acceleration clause that allows the lender to demand the full remaining balance immediately upon default. Specify any cure period the borrower has to remedy the default before acceleration takes effect.

Late Payment and Prepayment Terms

State the late payment fee amount or percentage and the grace period after which it applies. Specify whether the borrower may prepay the loan in full or in part without penalty. Some loan agreements include a prepayment penalty to compensate the lender for lost interest income.

Governing Law and Dispute Resolution

Specify the state law that governs the agreement and the jurisdiction for any legal proceedings. Include a dispute resolution clause specifying whether disputes will be resolved through negotiation, mediation, arbitration, or litigation. An attorney fee provision can deter frivolous disputes by requiring the losing party to pay the prevailing party's legal costs.

Signatures and Date

Both the lender and borrower must sign and date the agreement. If a business entity is a party, the authorized representative signs on behalf of the entity and states their title. Loan agreements can generally be signed electronically under the ESIGN Act, but some lenders prefer wet ink signatures for the original document.

Signature Requirements

Electronic Signature Accepted

Loan agreements are fully valid with electronic signatures under the ESIGN Act and UETA. Both the lender and borrower must sign. Notarization is optional but may be required if the loan is secured by real property.

How to Fill Out a Loan Agreement

1

Enter Party Information

Fill in the full legal name and address of the lender and borrower. If either party is a business entity, include the entity name, type (LLC, corporation, etc.), and state of formation. Verify spellings and addresses for accuracy.

2

Specify the Loan Amount and Interest Rate

Enter the principal loan amount in numerals and words. Set the annual interest rate and confirm it complies with your state's usury laws. Specify whether interest is simple or compound and the calculation method. If the rate is variable, describe the index and adjustment frequency.

3

Define the Repayment Schedule

Choose the repayment structure and enter the specific terms. For installment loans, state the monthly payment amount, the first payment date, and the final payment date. For balloon loans, specify the interest-only payment amount and the balloon payment date and amount.

4

Set Default and Remedy Provisions

Define each event of default and the cure period (typically 10 to 30 days for payment defaults). Review the acceleration clause to confirm it reflects both parties' agreement. Specify any additional remedies available to the lender, such as the right to collect attorney fees.

5

Add Late Payment and Prepayment Terms

Enter the late fee amount or percentage and the grace period. Decide whether the borrower can prepay without penalty. If a prepayment penalty applies, state the penalty amount or calculation method clearly.

6

Sign and Distribute

Both parties sign and date the loan agreement. Each party should receive an original signed copy. If the loan is secured, also execute a separate security agreement and file a UCC-1 financing statement if personal property collateral is involved.

Loan Agreement Requirements by State

Loan Agreement laws and requirements differ across states. Key variations include specific language requirements, notarization mandates, witness requirements, filing deadlines, and enforceability standards. Our templates incorporate state-specific provisions when you select your jurisdiction.

For the most comprehensive state-specific version, use our AI generator which automatically applies your state's legal requirements.

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Free Template vs Custom Loan Agreement

FeatureFree TemplateCustom (AI or Attorney)
Basic loan agreement structure
Interest rate and repayment terms
State-specific usury law complianceRates vary by state-
Acceleration and default provisions-
Attorney review and customization-
Digital download (PDF/Word)

Loan Agreement Template FAQ

What is a loan agreement?
A loan agreement is a legally binding contract between a lender and a borrower that documents the terms of a loan, including the principal amount, interest rate, repayment schedule, and consequences of default. Unlike a simple promissory note, a loan agreement includes mutual obligations for both parties, such as the lender's obligation to disburse funds and the borrower's obligation to repay according to the stated terms. Loan agreements are governed by state contract law and, for consumer loans, federal regulations such as the Truth in Lending Act.
Is a loan agreement legally binding?
Yes, a loan agreement is legally binding when it contains the essential elements of a contract: offer, acceptance, consideration (the loan amount), and mutual assent to the terms. The Statute of Frauds in most states requires loan agreements to be in writing to be enforceable, particularly for loans above a certain dollar threshold or loans that cannot be repaid within one year. A signed loan agreement can be enforced in court if the borrower defaults, allowing the lender to obtain a judgment for the outstanding balance.
What should be included in a loan agreement?
A comprehensive loan agreement should include the names and addresses of the lender and borrower, the principal loan amount, the interest rate and calculation method, the repayment schedule with specific due dates, late payment penalties, default definitions and cure periods, an acceleration clause, prepayment terms, governing law, and signature blocks. For secured loans, the agreement should reference the collateral and the separate security agreement. For business loans, financial covenants and reporting requirements are also common.
What is the difference between a loan agreement and a promissory note?
A promissory note is a one-sided promise by the borrower to repay a debt. It creates an obligation only for the borrower and is classified as a negotiable instrument under UCC Article 3, meaning it can be transferred to third parties. A loan agreement is a bilateral contract that creates obligations for both parties: the lender agrees to provide funds under certain conditions, and the borrower agrees to repay under the stated terms. Loan agreements typically contain more detailed provisions such as covenants, representations, and conditions precedent to disbursement.
Do personal loans need a written agreement?
While oral loan agreements can be enforceable in some situations, a written agreement is strongly recommended for any personal loan. The Statute of Frauds requires a writing for loans that exceed certain amounts or cannot be repaid within one year. Beyond legal enforceability, a written agreement prevents misunderstandings about the interest rate, repayment schedule, and other terms. The IRS also requires documentation to distinguish a bona fide loan from a gift, which has different tax consequences for both parties.
What is usury and what are usury laws?
Usury is the practice of charging an illegally high interest rate on a loan. Usury laws are state statutes that set the maximum interest rate a lender can charge. These limits vary significantly by state, ranging from around 6% to over 30% depending on the loan type and borrower. Violating usury laws can result in severe penalties, including voiding the interest entirely, requiring the lender to refund excess interest, or in some states, rendering the entire loan unenforceable. Licensed lenders may be subject to different rate limits than private individuals.
Can I lend money without a license?
Private individuals can generally make occasional personal loans without a lending license. However, if you engage in lending as a regular business, most states require you to obtain a lending license and comply with consumer lending regulations. The threshold for what constitutes "regular" lending varies by state. Federal regulations such as the Truth in Lending Act and state consumer protection laws also impose disclosure and fairness requirements on certain loan transactions. Consult your state's banking department to determine whether your lending activity requires licensure.
What happens if a borrower defaults on a loan agreement?
When a borrower defaults, the lender can invoke the acceleration clause to demand the full remaining balance immediately. If the borrower fails to pay, the lender can file a lawsuit to obtain a court judgment for the outstanding amount, plus interest, late fees, and potentially attorney fees. With a judgment, the lender can pursue collection through wage garnishment, bank account levies, or property liens. For secured loans, the lender can seize and sell the collateral. The default also damages the borrower's credit and may trigger cross-default provisions in other agreements.

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Attorney-Verified Document: All Legal Tank templates are drafted and reviewed by licensed attorneys to ensure legal accuracy and compliance with current state and federal laws. While our templates meet professional legal standards, individual circumstances vary. We recommend consulting with a licensed attorney in your jurisdiction for complex or high-stakes legal matters. Legal Tank is not a law firm and use of our platform does not create an attorney-client relationship.

Reviewed by licensed attorneys · Editorial policy · Last updated March 2026

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