Letter Borrowing Money From A Friend Contract Sample: Free & Effective

In this article, I’ll share my personal experience and provide a step-by-step guide, complete with a customizable template, to help you draft a respectful and clear letter for borrowing money.

Key Takeaways:

  1. Understand the Importance: Acknowledge the sensitivity of borrowing money from a friend.
  2. Be Clear and Honest: Clearly state the amount, purpose, and your repayment plan.
  3. Free Template: Utilize the provided template to simplify the process.
  4. Include a Loan Agreement: Outline terms in a simple contract.
  5. Follow-up and Repayment: Commit to timely repayment and maintain communication.

Step 1: Acknowledge the Sensitivity of the Situation

Before writing the letter, recognize that asking a friend for money can affect your relationship. Be prepared for any outcome, including a refusal, and respect their decision.

Real-Life Example: When I needed funds for an unexpected medical expense, I approached my friend with the understanding that she might not be comfortable lending the money.

Watercolor painting of two friends holding a loan agreement

Step 2: Be Clear and Honest in Your Request

Letter Content:

  • Amount Needed: Be specific about how much you need.
  • Purpose: Clearly explain why you need the funds.
  • Repayment Plan: Outline how and when you plan to repay.

Example: “I need $2,000 for medical bills and plan to repay $200 monthly.”

Step 3: Draft a Formal and Respectful Letter

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Template Structure:

  1. Greeting: Start with a friendly yet formal greeting.
  2. Introduction: Briefly state your purpose.
  3. Details of Loan Request: Mention the amount, purpose, and repayment plan.
  4. Gratitude: Express appreciation for considering your request.
  5. Closing: End respectfully.

Template Example:

Dear [Friend’s Name],

I hope this letter finds you well. I am writing to ask for a financial favor…

[Your Name]

Step 4: Include a Simple Loan Agreement

Loan Letter Sample Person to Person

Contract Elements:

  • Loan Amount
  • Repayment Schedule
  • Interest (if any)
  • Signatures

Sample Contract:

Date: [Insert Date]

Borrower: [Your Full Name]
Lender: [Friend’s Full Name]

Recitals: The parties hereby agree to the following terms of the loan:

  1. Loan Amount: The Lender agrees to loan the Borrower the sum of [Insert Loan Amount] dollars ($[Amount]).
  2. Purpose of Loan: The Borrower acknowledges that the loan is provided exclusively for [Insert Purpose of the Loan].
  3. Repayment Terms:
    • The Borrower agrees to repay the total amount in [Insert Number] monthly installments of $[Insert Monthly Repayment Amount] each.
    • The first installment is due on [Insert First Payment Date], with subsequent installments due on the same day of each following month.
    • The final installment will be due on [Insert Final Payment Date].
  4. Interest (Optional): [If applicable, include details about interest rate and how it will be applied to the loan. If no interest is charged, state: “This loan is interest-free.”]
  5. Late Payment: In case of late payment, [insert any late payment terms or penalties, or state: “No late fees will apply.”]
  6. Prepayment: The Borrower may pay off the entire remaining balance of the loan at any time without penalty.
  7. Default Terms: In case of default, [insert terms of what constitutes a default and consequences, such as accelerated repayment clause].
  8. Governing Law: This Agreement shall be governed by and construed in accordance with the laws of [Insert State/Country].
  9. Amendment: This Agreement may only be amended or modified by a written document executed by both parties.
  10. Entire Agreement: This document constitutes the entire agreement between the parties and supersedes all prior discussions, agreements, or understandings of any kind.


Borrower’s Signature: ___________________________
Name: [Your Full Name]
Date: [Insert Date]

Lender’s Signature: ____________________________
Name: [Friend’s Full Name]
Date: [Insert Date]

Note: This sample contract is for illustrative purposes and may need to be adjusted based on specific needs and legal requirements. It’s recommended to consult with a legal professional for advice tailored to your specific situation.

Step 5: Maintain Professionalism and Respect

Even though you are dealing with a friend, maintain a professional and respectful tone throughout the letter and agreement. This shows your seriousness and commitment to the arrangement.

Step 6: Commit to Timely Repayment and Regular Communication

After the agreement, ensure you stick to the repayment plan. Regularly update your friend on your financial situation and any changes to your repayment capability.


Writing a letter to borrow money from a friend requires a balance of honesty, clarity, and respect.

By following these steps and using the provided template, you can create a clear agreement that safeguards both your financial needs and your friendship.

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Frequently Asked Questions (FAQs)

A professional office setting with a young woman sitting at a desk, working on a computer

Q: What Should I Include in a Contract When Borrowing Money from a Friend?

Answer: When I borrowed money from a friend, I made sure our contract included the loan amount, repayment terms, and any interest rates. 

We also agreed on the repayment schedule and what would happen if I couldn’t pay on time. It was important to have clear communication and written agreements to avoid any misunderstandings.

Q: How Do I Approach My Friend About Signing a Contract for a Loan?

Answer: In my experience, the key was to be open and respectful. I explained to my friend why a written contract was important for both of us. It helped to assure them that I was serious about repaying the loan and wanted to protect our friendship from potential financial misunderstandings.

Q: Can a Loan Contract Between Friends Include Interest?

Answer: Absolutely! When I borrowed money from a friend, we agreed on a small interest rate. This was to acknowledge the value of the money lent and to compensate for any inconvenience. 

However, it’s crucial to keep the interest rate reasonable and clearly define it in the contract.

Q: What Happens if I Can’t Repay the Loan as Agreed?

Answer: When I faced difficulties repaying a loan, communication was key. I talked to my friend immediately, explaining the situation and proposing a new repayment plan. 

Our contract had a clause for such scenarios, which helped us handle the situation without damaging our friendship.

Q: Should We Get Legal Advice for a Loan Contract Between Friends?

Answer: While it’s not always necessary, getting legal advice can be beneficial. For me, consulting a legal expert ensured that our contract was legally sound and covered all necessary aspects. It gave both of us peace of mind and a clear understanding of our obligations.

2 thoughts on “Letter Borrowing Money From A Friend Contract Sample: Free & Effective”

  1. Useful and well-organized, providing straightforward advice and effective templates for handling financial matters sensitively. It excellently balances financial precision with preserving personal relationships.

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