Friendly Loan Agreement

Lending money to friends, relatives or business partners without a written agreement is risky. If the borrower fails to repay, you will struggle to enforce your rights.

A Friendly Loan Agreement protects both parties by clearly stating repayment terms, interest (if any), default clauses, and legal consequences.

Why You Need a Written Friendly Loan Agreement

• Protects both lender and borrower
• Prevents misunderstandings
• Provides legal evidence if repayment is disputed
• Sets clear repayment schedule
• Avoids damaging personal relationships
• Makes debt recoverable in court
• Encourages responsible repayment

What We Include in the Agreement

A complete agreement includes:

✔ Loan amount & release method

Cash, bank transfer, instalments.

✔ Repayment schedule

Monthly, yearly, lump sum or flexible repayment.

✔ Interest clause (optional)

We advise on legal limits under Moneylenders Act.

✔ Collateral or security (optional)

Including land, vehicles, shares or personal guarantee.

✔ Default clauses

What happens if borrower delays or refuses to pay.

✔ Penalty interest (if applicable)

To encourage timely repayment.

✔ Legal remedies

Borrower agrees lender may initiate action if needed.

✔ Witness signatures

Strengthens enforceability.

✔ Stamping

Makes the agreement legally admissible.

Situations Where Friendly Loan Agreements Are Common

• Parents lending to children
• Personal loans to friends
• Emergency loans
• Business partners lending internally
• Loaning deposit for property purchase
• Lending to help someone settle debt