The family loan agreement template, done properly for England & Wales

Gift or loan? Decide first — it changes everything

The single most litigated question in family money cases is whether a payment was a gift or a loan. If it was a loan, it must be repaid and (if unpaid) can be claimed in the County Court. If it was a gift, it can’t — but it may count as a potentially exempt transfer for inheritance tax, dropping out of your estate only if you survive seven years. A loan, by contrast, stays in the lender’s estate as an asset until repaid or formally waived. If you’re not sure which you mean, try the gift-or-loan decision tool.

What the agreement must nail down

• The parties and the principal — full names, addresses, the exact sum, and how it’s advanced (bank transfer, date).
• The repayment plan — instalments or lump sum, amounts, dates, and the final maturity date. Vague “pay me back when you can” terms are where enforcement dies.
• Interest, if any — stated as an annual rate. There is no statutory cap on a private loan in England and Wales, but courts can reopen unfair relationships (Consumer Credit Act 1974, ss.140A–C), and any interest you receive is taxable savings income — the Personal Savings Allowance (£1,000 basic rate / £500 higher rate) may cover it, otherwise it belongs on a Self Assessment return.
• Missed payments and early repayment — a grace period or an acceleration right; whether early repayment is free (it usually should be, in a family).
• Death and incapacity — the debt becomes a claim against the borrower’s estate; an attorney under a lasting power of attorney or a Court of Protection deputy can act for a borrower who loses capacity.
• Governing law — the law of England and Wales, with its courts taking any dispute.

Why written wins in court

A signed agreement does three jobs at once: it proves the money was a loan, not a gift (the presumption of advancement can otherwise work against parents); it fixes the terms so the argument is about facts, not memories; and it anchors the six-year limitation clock (Limitation Act 1980, s.5) to clear dates. For unpaid loans up to £10,000, the small claims track of the County Court — including Money Claims Online — is designed for people without solicitors, and the signed agreement is the first document the judge will ask for.

A simple loan agreement template for the UK — and how to get it as PDF or Word

People look for a loan agreement template in three shapes: a PDF to print and sign, a Word file to edit, and a simple one-page version for small sums. All three want the same eight things — the parties, the amount, the repayment schedule, any interest, what counts as a missed payment, prepayment rights, the governing law of England and Wales, and both signatures. The format is packaging; those eight terms are the product.

A simple template is genuinely fine for a small, short, interest-free loan between people who trust each other. It stops being fine the moment the sum is large, the schedule runs past a year, interest is involved, or a mortgage lender is going to ask where the deposit came from. At that point what you want is not a shorter document but a complete one — and one where the borrower has signed too, because a PDF you filled in yourself proves your version of events and nothing more.

You do get a PDF. LendRight builds the agreement from your answers, and you can download it as a PDF at the draft stage — drafting is free, so you can read the finished wording in full before deciding anything. When you both sign, the final version is a locked PDF with a Certificate of Completion recording who signed, when, how they were verified, and a tamper-evident fingerprint.

What you will not find here is a Word file, and that is deliberate. An editable document is useful while you are deciding terms and a liability once the agreement is signed — a signed contract that either party can still alter is worth considerably less as evidence. Draft it here, adjust the terms as often as you like, and take away a document that cannot be quietly edited afterwards.

Free loan agreement template UK: what free gets you, and what it does not

A free loan agreement template gets you structure — a sensible running order and a reminder of the clauses worth having. That is real value, and for a modest loan between two organised people it can be enough.

What free does not get you is a check. Nobody reads your figures back to you. Nothing flags that your repayment dates stop before the balance clears, that your interest rate is stated monthly when the document says annual, or that you have written “England” where the agreement needs “England and Wales”. And most free templates circulating online are American: they carry state governing-law lines, references to notaries who play no part in English private lending, and clauses with no meaning here.

The other gap is signing. A free template ends at a blank line. You still have to print it, get the borrower in the same room or chase a scan, and hope nobody later says the copy they saw was different.

Sample loan agreement: a worked example between family members

Here is what a completed agreement looks like in practice. Priya lends her brother Sam £8,000 towards a car. They agree no interest, repayment over twenty months, and that Sam can clear it early without penalty.

The finished document records: Parties — Priya Shah (lender) and Sam Shah (borrower), with addresses. Principal — £8,000, transferred by bank transfer on 3 September 2026. Interest — none; the parties record that the loan is interest-free by agreement. Repayment — £400 on the first working day of each month for twenty months, beginning 1 October 2026, by standing order to the lender’s account. Prepayment — permitted in whole or part at any time, with no charge. Missed payment — the parties will discuss in good faith within fourteen days; the lender may require the balance if two consecutive payments are missed. Governing law — England and Wales. Signatures — both parties, dated.

Notice what the example does that a blank sample cannot: every line is a decision already made. That is the actual work of a loan agreement — not the wording, but agreeing the terms while everyone is still pleased with each other.

Is an e-signed agreement valid?

Yes. A private loan agreement is a simple contract, and electronic signatures are valid for simple contracts in England and Wales — under the Electronic Communications Act 2000 and UK eIDAS, and confirmed by the Law Commission’s 2019 report on electronic execution. LendRight goes further than a squiggle: every agreement is sealed as a locked PDF with a Certificate of Completion recording who signed, when, how they were verified, and a SHA-256 fingerprint that anyone can verify independently.

Common questions

What LendRight is — and isn’t