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Creating a written loan agreement helps minimize your risks when loaning money to a friend or relative. The most basic loan agreement between family and friends is often called an "IOU." These informal agreements are typically for small amounts of money and simply state the dollar amount that is owed.

There are 10 basic provisions that should be in a loan agreement. Identity of the parties. The names of the lender and borrower need to be stated. ... Date of the agreement. ... Interest rate. ... Repayment terms. ... Default provisions. ... Signatures. ... Choice of law. ... Severability.

Wiedman suggests putting everything involving the loan in your written agreement: "The date of the loan, loan amount, repayment terms, interest rate, payment due dates and so forth." That said, putting everything in writing can make things awkward, but it's a safe move if you want to ensure repayment.

A loan agreement is a written agreement between a lender that lends money to a borrower in exchange for repayment plus interest. The borrower will be required to pay back the loan in ance with a payment schedule (unless there is a balloon payment).

If you don't charge interest (or don't charge enough interest) but you can prove the borrower repaid the loan, the IRS will calculate the minimum interest rate for you and tax you based on that income. That's right?even if you didn't get the ?income,? the IRS will still tax you for it.

A loan agreement is any written document that memorializes the lending of money. Loan agreements can take several forms. The most basic loan agreement is commonly called an "IOU." These are typically used between friends or relatives for small amounts of money, and simply state the dollar amount that is owed.