How to Write an IOU Letter? Free Example for Loans to Family and Friends

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What is the difference between an IOU and a Promissory Note?

An IOU (I owe you) is a simple document that acknowledges a debt and indicates that the borrower promises to pay it back. It’s typically used for informal debts between individuals, such as loans between friends or family members.

A promissory note is a more formal document that is used to record a variety of debts, including loans, mortgages, and other financial obligations. It’s a legally binding document that includes specific terms and conditions, such as the amount of the debt, the interest rate (if applicable), and the terms of repayment. It may be used in a variety of contexts, including personal loans, business loans, and other financial transactions.

In general, an IOU is a simpler and less formal document than a promissory note. An IOU is typically used for informal debts between individuals, while a promissory note is often used for more formal or complex financial transactions.

➤ IOU and Promissory Notes Constitute a Promise to Pay a Loan (Legally Enforceable)

Need to Craft an IOU but Not Sure Where to Start? Our Writing Tips

An IOU (I owe you) letter is a simple document that acknowledges a debt and indicates that the borrower promises to pay it back. Here are the steps for writing an IOU letter:

  1. At the top of the letter, identify the borrower and the lender by name and last names to avoid any confusion. Don't forget also the date, this will help establish when the debt was incurred.
  2. Next, specify the amount of the debt. Be as specific as possible and include the currency in which the debt will be repaid.
  3. Detail the terms of repayment. This should include the date by which the debt must be repaid, any monthly payments, as well as any interest or other fees that may be incurred.
  4. While an IOU letter isn’t a formal legal document, it’s still a good idea to always use formal language to avoid any confusion or misunderstanding.
  5. Include a space for the borrower to sign and date the letter. This serves as a way to confirm their commitment to repaying the debt.
  6. Make a copy of the letter for both the borrower and the lender. This can be helpful for record-keeping purposes in case there are any disputes about the debt in the future.

You May Also be Interested in Our Sample Letter to Request a Loan From the Bank

Need to Write an IOU or Promissory Note? Here is are Templates Easy to Adapt

A Simple IOU Template

AMOUNT: ($ 1 000)

Date due for repayment: (day/month/year)

Today, (20th) of (May) in the year Two Thousand and (twenty-three), I, (your full name) guarantee to pay to the order of (name of payee), who is a resident of (street number, house/office number, city, postal code, country.) the amount of ($1 000) (write the amount in words).

Interest will be charged and added to the outstanding balance at a (monthly) rate of (2)%.

Should the repayment be delayed and not made after (Number) days of the original agreed payment date, the sum of $(1 000) shall be added to the main sum.

The total amount is payable on (day/month/year) in (full address/location).

Signed and witnessed by:

(Witness' name in print) (Witness' address)

(Witness' signature)

Borrower's Name (full name)

Borrower's Address: (full address)

Borrower's Signature: (sign)

Date: (Day/month/year)

A Sample of Promissory Note

Disclaimer: It's advised to seek legal counsel if there is uncertainty regarding your rights

This Promissory Note Agreement (the “Agreement”) is entered into by and between [Name], also referred to herein as the “Owing Party,” and [Name], also referred to herein as the “Receiving Party.”

The Owing Party hereby promises to pay the Receiving Party the sum of ___________dollars ($_____) (the “Amount”), within ____ weeks from the date hereof, which shall be deemed to be the last day of said period (the “Due Date”). Interest may be charged on the Amount until payment is made in full at the rate of ____% per annum, calculated from the date of this Agreement forward.

Any and all payments shall be made by check or money order payable to the Receiving Party and delivered to the Receiving Party’s address as stated below or such other address as the Receiving Party may designate in writing.

The Owing Party shall also be responsible for any and all costs incurred as a result of the collection of this debt, including but not limited to court fees and attorney’s fees.

This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of both the Owing Party and Receiving Party. This Agreement constitutes the entire agreement between the parties. Any alterations, amendments, or modifications to this Agreement shall be made in writing and duly executed by both parties herein.

In witness whereof, the parties hereto have executed this agreement as of the date first written above.

Owing Party: _____________________

Receiving Party: ___________________

Date of Agreement: ________________

  • Amount: _______________________
  • Due Date: ______________________
  • Interest Rate: ___________________
  • Address of Receiving Party: ____________________________________________

By signing below, both parties agree to the terms and conditions of this Agreement.

Signature of Owing Party: ___________________ Signature of Receiving Party: _________________

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