What happens if the borrower stops making payments?

Under this agreement, missed payments trigger the late fee provisions after the grace period. If payments remain unpaid, the lender can declare default and accelerate the entire remaining balance, making it immediately due. The lender may then pursue collection through small claims court (for amounts within the limit) or civil court, and can enforce any collateral provisions.

Is interest on a private loan taxable?

Yes. The lender must report interest income received on private loans to the IRS, typically on Schedule B of Form 1040. If the loan is between family members at a below-market rate, the IRS may impute interest income even if none was paid. The borrower may be able to deduct interest paid in some circumstances — consult a tax advisor.

What is the difference between a loan agreement and a promissory note?

A promissory note is a short-form document — essentially a signed promise to repay a specified sum. A loan repayment agreement is more comprehensive, detailing both parties' obligations, default remedies, collateral provisions, and other terms. For loans over $1,000 or between non-family parties, a full loan agreement is generally preferred.

Can I charge any interest rate I want on a private loan?

No. Every US state has usury laws that cap the maximum interest rate on private loans. Charging above the usury rate is illegal and can result in the interest being voided or the contract being unenforceable. Interest rate limits vary widely by state — for example, California caps personal loan rates at 10% per annum for non-licensed lenders.

Free Loan Repayment Agreement Template — Fill Out & Download Instantly

Free — No Sign-Up RequiredPDF & WordUpdated April 10, 2026

A loan repayment agreement is a legally binding contract that documents the terms under which one party (the lender) lends money to another party (the borrower) and the borrower agrees to repay the loan in structured installments. This template covers all essential loan terms including the principal amount, interest rate, repayment start date, monthly payment amount, total number of payments, late fee provisions, and optional collateral.

⚠️ Legal Disclaimer: This template is attorney-reviewed and built to US legal standards. It does not substitute for professional legal advice. For complex situations, we recommend consulting a licensed attorney.

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Governing State*

Lender Full Name*

Full legal name of the person or entity lending the money

Lender Address*

Borrower Full Name*

Borrower Address*

Loan Principal Amount*

Total amount being lent

Annual Interest Rate (%)*

Enter 0 for interest-free loan. Check your state's usury limit.

First Payment Due Date*

MM/DD/YYYY

Monthly Payment Amount*

Total Number of Payments*

Total monthly installments to repay the loan

Late Fee Grace Period (Days)*

Number of days after due date before a late fee is applied

Late Fee Amount*

This loan is secured by collateral

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LOAN REPAYMENT AGREEMENT

This Loan Repayment Agreement ("Agreement") is entered into as of [First Payment Due Date], by and between:

[Lender Full Name] ("Lender")

Address: [Lender Address]

and

[Borrower Full Name] ("Borrower")

Address: [Borrower Address]

1. LOAN AMOUNT

Lender agrees to loan, and Borrower agrees to borrow, the principal sum of $[Loan Principal Amount] (the "Loan"). Borrower acknowledges receipt of the full Loan amount.

2. INTEREST RATE

The outstanding principal balance of the Loan shall bear interest at the annual rate of [Annual Interest Rate (%)]% per annum, calculated on the basis of a 365-day year. Interest shall accrue from the date of this Agreement until the Loan is repaid in full.

3. REPAYMENT SCHEDULE

Borrower agrees to repay the Loan in [Total Number of Payments] consecutive monthly installments of $[Monthly Payment Amount] each, beginning on [First Payment Due Date] and continuing on the same day of each month thereafter until the Loan is paid in full.

Each monthly payment shall be applied first to accrued and unpaid interest, then to the reduction of the principal balance. All payments shall be made by check, electronic transfer, or other method agreed to by Lender, payable to [Lender Full Name].

4. PREPAYMENT

Borrower may prepay the Loan in whole or in part at any time without penalty. Prepayment shall be applied first to accrued interest and then to the outstanding principal balance. Prepayment does not suspend or reduce the Borrower's obligation to make subsequent scheduled payments unless the Loan is paid in full.

5. LATE PAYMENTS

If Borrower fails to make any payment within [Late Fee Grace Period (Days)] days of its due date, Borrower shall pay a late fee of $[Late Fee Amount] per occurrence. Late fees are in addition to the regularly scheduled payment and do not substitute for it. Consistent late payments constitute a default under this Agreement.

6. DEFAULT AND ACCELERATION

Borrower shall be in default under this Agreement if Borrower: (a) fails to make any payment when due and does not cure such failure within 10 days of written notice from Lender; (b) makes a materially false representation in connection with obtaining the Loan; (c) becomes insolvent or files for bankruptcy; or (d) otherwise materially breaches this Agreement.

Upon default, Lender may, at its option, declare the entire unpaid principal balance, together with all accrued interest and fees, immediately due and payable ("acceleration"). Lender shall provide written notice of acceleration to Borrower at the address stated herein.

8. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between Lender and Borrower with respect to the Loan and supersedes all prior discussions, representations, and agreements relating thereto.

9. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of [Governing State]. Any disputes arising hereunder shall be resolved in the courts of [Governing State].

10. SEVERABILITY

If any provision of this Agreement is found to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Loan Repayment Agreement as of the date first written above.

_________________________________

[Lender Full Name]

Lender

Date: _______________

_________________________________

[Borrower Full Name]

Borrower

Date: _______________

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Governing State*

Lender Full Name*

Full legal name of the person or entity lending the money

Lender Address*

Borrower Full Name*

Borrower Address*

Loan Principal Amount*

Total amount being lent

Annual Interest Rate (%)*

Enter 0 for interest-free loan. Check your state's usury limit.

First Payment Due Date*

MM/DD/YYYY

Monthly Payment Amount*

Total Number of Payments*

Total monthly installments to repay the loan

Late Fee Grace Period (Days)*

Number of days after due date before a late fee is applied

Late Fee Amount*

This loan is secured by collateral

What Is a Loan Repayment Agreement Template?

When Do You Need It?

You need a loan repayment agreement when lending or borrowing money outside of a traditional bank or financial institution — such as a personal loan between friends or family members, a business loan from a private investor, or a payment plan for an outstanding debt. Even small loans between trusted individuals benefit from a written agreement, as memories of verbal promises fade and relationships can be strained without clear documentation of the agreed repayment terms..

What's Included in This Template

Lender and borrower identification with addresses
Loan principal amount
Annual interest rate
Repayment start date and schedule
Monthly payment amount
Total number of payments
Late fee trigger period and amount
Optional collateral description
Default and acceleration clause
Governing state and applicable law
Signature blocks for both parties

How to Fill It Out

Identify Lender and Borrower — Enter the full legal names and mailing addresses of the lender and borrower. For businesses, use the registered entity name. Accurate identification is essential for enforcement if the borrower defaults.

Enter Loan Amount and Interest Rate — Enter the total principal amount being lent and the annual interest rate. If this is an interest-free loan, enter 0%. Note that some states have usury laws capping the maximum allowable interest rate for private loans — check your state's limit before agreeing to a rate.

Set the Repayment Schedule — Enter the repayment start date, the agreed monthly payment amount, and the total number of payments. Verify that the payments are sufficient to repay principal and interest over the agreed term. An amortization calculator can help confirm the numbers are correct.

Add Late Fees and Optional Collateral — Specify the number of days after a payment due date before a late fee is triggered, and the dollar amount of the late fee. If collateral secures the loan (such as a vehicle or property), check the collateral box and describe the collateral in detail.

Legal Requirements & Notes

Loan repayment agreements between private individuals are governed by state contract law and usury statutes. Key considerations:

Usury Laws: Every state sets a maximum interest rate for private loans. Exceeding the usury limit can result in the interest being voided or, in some states, the entire loan becoming unenforceable. Common limits range from 6% to 24% annually for consumer loans — check your state's specific rules.

IRS Gift Rules: Loans between family members may be treated as taxable gifts by the IRS if interest is charged below the Applicable Federal Rate (AFR) or if the loan is interest-free and exceeds $10,000. The IRS publishes monthly AFR tables. See IRS Publication 550 for details.

Promissory Note vs. Loan Agreement: A promissory note is a simpler instrument — a promise to pay. A loan agreement is more comprehensive, covering terms, default, collateral, and remedies. For larger or more complex loans, a full loan agreement is preferable.

Collateral and Security Interests: If the loan is secured by personal property (not real estate), the lender should file a UCC-1 financing statement with the state to perfect the security interest and protect priority over other creditors.

Mortgage and Deed of Trust: If real estate is used as collateral, a mortgage or deed of trust must be executed and recorded with the county recorder's office. This agreement alone is not sufficient to create a valid lien on real property.

Bankruptcy Risk: If the borrower files for bankruptcy, the lender may become an unsecured creditor and recover little or nothing. A perfected security interest in collateral improves the lender's position.

Frequently Asked Questions

Not necessarily for simple personal loans. This template covers the essential terms needed for an enforceable private loan agreement. However, for large loan amounts, loans secured by real estate, or loans involving complex business relationships, consulting an attorney is advisable to ensure the agreement is properly structured and compliant with state law.