Loan agreement

About this loan agreement template

This loan agreement has been written for the specific situation of lending money to family members or friends in order to use for the purchase or renovation of a property.

Even when you trust the person to whom you are making the loan to repay you in full and on time, with such a large amount being lent, you should record the agreement in writing. By using this document, you should avoid confusion about whether the money was a gift or a loan, when the money should be repaid and with how much interest.

This is particularly important for lending to more than one person where there is a risk the relationship between the borrowers may not last, such as a son or a daughter and his or her partner, or where the property will be jointly owned with someone other than the borrower. Having the agreement in writing will make it clear who has the obligation to repay.

Our use of plain English makes this agreement easy to edit and clear to all parties. Once signed it is legally binding.

When to use this agreement

Use this agreement to record a loan where the money will specifically be used to buy, renovate or refurbish a property. It can be used for lending to one or more people jointly.

The document includes the option for a third party, such as another family member or a company to guarantee the debt.

It is suitable for situations such as:

• lending to a family member and his or her partner to use as a deposit for a house or flat
• lending to a family member to pay off a mortgage
• lending to a friend for property renovations

Either party may be abroad or in the Commonwealth of Australia, and the loan can be of any size.

Alternatives to this document

If you would prefer to use a simpler agreement, see our Friends and family loan agreement.

Unfortunately we are not able to sell a document that secures the debt against the property - such a 'charge' is a restricted activity under law and requires a solicitor. However, in many cases, doing so would break the terms of any mortgage agreement. If the borrower has other assets, such as a share portfolio or physical assets, you may like to use these as security instead. See our other loan agreement templates.

Agreement features and contents

• Definition and purpose of the loan
• Relationship and status of the borrowers
• Borrowers' warranties
• Sum of the loan and advances
• Repayment conditions
• Interest payable
• Early repayment
• Method of payment
• Provisions covering default (non-repayment)
• Assignment (transfer of obligations to repay)
• Guarantor and guarantee
• Miscellaneous legal matters

This template is supported by drafting notes so that you will know whether you can safely delete some provision. It is most unlikely that you will want to add new provisions, but if you do, it is easy. Our layout and use of plain English also make it very easy to edit by deletion.

The law in this document

There is little specific statutory law relating to personal lending, so you are free to agree the terms you want with the borrower. We give you options for different situations.

Drawn outside the National Consumer Credit Protection Act 2009, this agreement is not suitable for companies in the business of lending or providing credit to consumers.