A family loan agreement template is a written contract that records a loan between relatives or close friends. It sets out the loan amount, the interest rate, and how and when the borrower will pay the money back. Putting these terms on paper keeps everyone on the same page when money is lent to a loved one.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
Create a personalized Family Loan Agreement online now!
Build Your Document
Answer a few simple questions to make your document in minutes
Save and Print
Save progress and finish on any device, download and print anytime
Sign and Use
Your valid, lawyer-approved document is ready
... or download your Family Loan Agreement as a PDF file
Create a personalized Family Loan Agreement online now!
What is a Family Loan Agreement?
A family loan agreement is a document that legally binds the borrower and lender to the terms and conditions of the loan. Lending money to family or friends can have the potential to spoil relationships. A loan agreement template can help in providing transparency and clarity between family members. This also gives a sense of surety to the lending party that the person borrowing the money will pay back the loan with interest.
What to Consider Before Borrowing from Family
One should consider many things before borrowing money from or lending money to a family member. Some of the things to be considered are discussed below. Talking these through before you sign anything helps both sides feel comfortable with the loan.
Tax matters for the lender
Interest rates for the loan
Alternatives to a family loan, such as a gift or co-signing
Tax Matters
The lender must figure out the tax implications before lending money to a family member. For instance, if the interest charged by the lender is below the applicable federal rate, the Internal Revenue Service may consider the loan to be a gift and apply gift tax on the lender. To avoid this, the lender may set the rate equal to or slightly above the applicable federal rate.
Interest Rates
Interest rates applied on the loan must be in accordance with state and federal laws. For instance, each state sets a cap on the maximum interest rate that can be charged on a loan.
Alternatives
The individuals should also consider if there are other alternatives available. If a family member is in need of money, one of the options of helping him or her is by gifting the money to them. This means that the person will not be liable to pay back the money and the family member giving the money may have to pay gift tax depending on the amount of money gifted.
Another alternative is that one can help a family member in getting a loan from a bank by co-signing the loan. This means that the co-signer may be liable to pay if the borrower defaults payment.
Write down the amount, the date and every payment you make or receive. A simple record helps both sides remember what was agreed.
Pros and Cons of Using a Family Loan
A family loan can be easier to arrange than a bank loan, but it also carries risks of its own. The pros and cons below can help you decide whether lending or borrowing within the family makes sense for you.
Pros of a Family Loan
Flexible Repayment Options. Family loans have more flexible repayment options as opposed to bank loans because of the nature of the relationship between the family members. It is also possible that a family member may allow delayed payments or even halt payments if the borrower is facing financial difficulty.
Lower Interest Rates. Family loans usually come with lower interest rates than bank loans. In some cases, the lending family member may not even charge interest from the borrower.
Cons of a Family Loan
Lack of Security. Due to the personal nature of the relationship between the lender and the borrower, family loans are usually unsecured loans and it may be possible that the borrower fails to repay the loan. In that case, the lender can file a legal action or go through the small claims court.
Damaged Relationships. In case there is a dispute between the lender and borrower after giving a loan to a family member, it can put enormous strain on the relationship between them and can also cause tension in the whole family.
What Should Be Included in a Family Loan Agreement
A family loan agreement can be adjusted to fit the people and the loan involved. Most agreements cover the general points below. Read through them before you fill in the template, so you know what to have ready.
Date and Details of the Parties. At the beginning of the document, the date on which the document was signed must be mentioned. The agreement must then specify the details of the lender and borrower including their full names and addresses.
Family Relation. The agreement should also mention the relationship between the borrowing family member and the lending family member. For instance, if the parties are brothers, the document should mention that the borrower the lender’s brother.
Loan Amount. The agreement must specify the principal amount being loaned out by the lender to the borrower.
Interest Rate. The document should also mention the interest rate applicable to the loan. The rate should be less than the usury rate applicable in the borrower’s State. Usury rate is the cap set on the maximum amount of interest rate that can be charged by the lender. Usury rates are usually set by the State and may vary in each State. The family members also have the option to not apply any interest on the loan. The same should also be specified in the document.
Payment Schedule. The document should provide a schedule regarding when and how the money must be paid back by the borrower. This repayment schedule can include weekly installments, monthly installments, or payments at other intervals. The agreement should also provide the date on or by which the total principal and interest should be paid in full.
Late Fees. Late fees are usually applicable in case of a default in payment by the borrower. This may also include any other reasonable expenses incurred by the lender in case of default including attorneys’ fees and interest incurred.
Governing State. The document should also specify the governing law. The lending family member and the borrowing family member should mention which State’s laws are applicable on the loan agreement.
Witnesses. The agreement should be made and signed in the presence of two witnesses. These witnesses should act in an unbiased manner in case of a dispute. The agreement should also include the name and signatures of the witnesses.
Signature of the Parties. The loan agreement becomes a legally binding document when the borrower and the lender have signed it. After finalizing all other details of the loan, each party must sign the agreement.
How to Fill Out the Family Loan Agreement Template
Download the form from this page and fill it in with the FormsPal PDF editor, or print it and write by hand. These steps follow the FormsPal template this page hands out, in the order the form asks for each entry. Have the names, the loan amount and the repayment plan ready before you start.
The screenshots under each step show the FormsPal Family (Friends) Personal Loan Agreement template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Borrower and Lender Write the Borrower's full name and the Lender's full name in the opening paragraph. The form has name blanks only, so keep addresses in your own records.Step 1: sample entries, not a real document.
Section 1: Loan Amount and Interest Rate Enter the loan amount in dollars. Then tick one box: either the interest rate per year, or the line saying the loan does not accrue interest.Step 2: sample entries, not a real document.
Section 2: Repayment Tick quarterly, monthly or weekly payments, then enter the payment amount and when each payment is due. If none of those fit, tick Other and describe your own schedule.Step 3: sample entries, not a real document.
Loan term and last day Write the length of the loan in months. Then enter the date of the last day of the term.Step 4: sample entries, not a real document.
Section 3: interest increase in default Enter the percentage by which the interest rate goes up if the loan falls into default.Step 5: sample entries, not a real document.
Section 6: Governing Law Write the name of the state in the blank after the words the law of the State of.Step 6: sample entries, not a real document.
Section 7: Guarantor Tick one box. If someone guarantees the loan, tick the first box and write the guarantor's name. If not, tick the second box.Step 7: sample entries, not a real document.
Section 8: Additional Terms and Conditions Use the lines for any extra terms both sides agreed on, one point per line. A short note on how the Borrower and Lender are related can go here too.Step 8: sample entries, not a real document.
Lender's signature, date and printed name Page 2 has the Lender's signature line, a date line and a line for the printed name. Fill in the date and name, then add the signature.Step 9: sample entries, not a real document.
Borrower's signature, date and printed name Page 3 has the same three lines for the Borrower. Fill in the date and name, then add the signature.Step 10: sample entries, not a real document.
Guarantor's signature, date and printed name Use these lines only if you ticked a guarantor in Section 7. Otherwise leave them empty.Step 11: sample entries, not a real document.
How to Sign and Use the Family Loan Agreement
Once the entries are complete, signing is the last stage. Go through the steps below in order, with the other side present if you can, so any question is settled before anyone signs.
Check the entries. Read the completed agreement together. Make sure the names, the loan amount, the repayment plan and the dates match what you agreed.
Sign the agreement. The borrower must affix his signature in the blank space provided in front of “Borrower’s Signature” and the lender must do so in the blank space provided in front of “Lender’s Signature.” Once the parties sign the agreement, it becomes a legal contract and binds them to the terms and conditions mentioned therein.
Witness signatures. The form should also be signed by two witnesses in the corresponding blank spaces provided on Page 3 at the end of the template.
Share and keep copies. Give the borrower a signed copy and keep one for the lender. Store the copies where both sides can find them later.
Frequently Asked Questions
What does the family loan agreement template include?
The template has blanks and choices for the points below, and it ends with signature lines for the Lender, the Borrower and a guarantor. The fill-out steps above walk through each blank.
The Borrower and Lender names
The loan amount
An interest rate or a no-interest choice
The repayment schedule
The loan term in months and the last day
The interest increase if the loan is in default
The governing state
An optional guarantor
Any additional terms
Can I fill in the family loan agreement online?
Yes. Press the Create My Document button to answer a few questions and fill in the family loan agreement template online, or download the PDF and complete it on your computer. You can also print it and write by hand.
Can a family loan carry interest?
The template gives you two choices in Section 1. Tick the first box and enter a yearly interest rate, or tick the second box if the loan should not accrue interest.
How can the borrower repay the loan?
Section 2 offers quarterly, monthly or weekly payments, and each one has room for the payment amount and a due date. There is also an Other option where you describe a different plan.
Can I add a guarantor to the loan?
Section 7 has a box for a guarantor and a line for their name. If you tick it, the guarantor has a signature line on page 3.
Where do I write extra terms?
Section 8 has several lines for additional terms and conditions. Write one point per line, or leave the lines empty if there is nothing to add.
General information, not legal or tax advice.
Jennifer M. Settles
Author & Attorney
With over 25 years of experience as a business and transactional attorney, Jennifer has mastered the craft of closing highly successful deals for her clients. Through her wide-ranging expertise in commercial contracts, real estate transactions, M&A and corporate law, Jennifer secures results that are second-to-none.
