Letter Borrowing Money From a Friend Contract Sample

Key Takeaways

  • Understanding the Need: Recognize the sensitivity of borrowing money and approach the topic with respect and professionalism.
  • Clarity in Terms: Clearly outline the loan amount, repayment schedule, interest rate (if any), and any other terms.
  • Legal Considerations: Ensure the contract is legally binding, possibly with notarization, to safeguard both parties.
  • Writing the Letter: Keep the tone polite and business-like; include all necessary details.
  • Template Provided: Use the template provided as a starting point for drafting your letter.
  • Maintaining Relationships: Remember the importance of maintaining a positive relationship beyond the transaction.


Borrowing money from a friend can be delicate. It’s not just about the financial transaction; it’s also about preserving a valuable relationship. Drafting a clear and concise borrowing letter is crucial in maintaining trust and setting professional boundaries. This step-by-step guide, complete with a template, will walk you through creating a letter and contract to borrow money from a friend responsibly.

Step 1: Determine the Need and Terms

Before you draft the letter, understand why you need the loan and how you plan to repay it.

Watercolor painting of two friends holding a loan agreement

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Key Points:

Watercolor painting woman typing on a sleek black laptop

  • Loan Purpose: Be ready to explain why you need the loan.
  • Repayment Plan: Decide on a realistic repayment schedule.
  • Interest: Discuss whether you’ll pay interest.
  • Legal Clauses: Consider including clauses for late payments or default.

Step 2: Discuss With Your Friend

Have an open conversation with your friend about the loan before sending the letter.

Discussion Checklist:

  • Loan amount
  • Repayment terms
  • Interest rate
  • Mutual expectations

Step 3: Drafting the Letter

Keep the tone courteous and professional, outlining all agreed-upon terms.

Letter Structure:

  1. Introduction: State your reason for writing.
  2. Loan Details: Specify the loan amount and reason.
  3. Repayment Terms: Clearly outline the repayment schedule.
  4. Interest and Fees: Mention any interest or administrative fees.
  5. Legal Clauses: Address late payment policies and other legal considerations.
  6. Conclusion: Express gratitude and willingness to discuss further.

Step 4: Legalize the Agreement

Consider notarizing the letter to make it legally binding and protect both parties.

Legalization Checklist:

  • Signatures of both parties
  • Witness signatures, if required
  • Notarization

Step 5: Maintain Communication

Keep the lines of communication open regarding the loan and any possible changes.

Communication Tips:

  • Regular updates on repayment
  • Immediate discussion of potential issues

Template for Borrowing Money From a Friend Contract

[Your Name]
[Your Address]
[City, State, Zip]


[Friend’s Name]
[Friend’s Address]
[City, State, Zip]

Dear [Friend’s Name],

I am writing to formalize our recent discussion regarding my need to borrow money. As discussed, I am currently facing [brief explanation of the financial need] and am in need of financial assistance.

Loan Amount and Purpose:

Amount Requested: [Specify the amount you wish to borrow]
Purpose: [Briefly describe what the loan will be used for]
Repayment Terms:

Total Loan Amount: [Loan amount plus any agreed interest or fees]
Repayment Schedule: [The timeline for repayment, including due dates]
Installments: [The amount of each installment]
Interest and Additional Fees (If Applicable):

Interest Rate: [Agreed upon interest rate]
Late Payment Fees: [Any fees that apply for late payments]
Both parties agree to adhere to the following terms and conditions:

The loan will be used solely for the purpose stated above.
Repayment will begin on [start date] and will be made by [method of payment].
[Optional: Notarization clause]
Please review and confirm the terms outlined in this letter by signing and returning a copy to me. I would like to express my sincere gratitude for your support during this time and assure you of my commitment to fulfilling these terms.

Thank you for considering my request.

Warm regards,

[Your Signature]
[Your Printed Name]

Acknowledged and agreed:

[Friend’s Signature]
[Friend’s Printed Name]


Writing a letter to borrow money from a friend involves clear communication, mutual respect, and a professional approach. By following these steps and using the template provided, you can create a transparent and respectful agreement that safeguards your relationship and financial responsibilities.


  • Always communicate openly with your friend about the loan.
  • Keep documentation of all payments made towards the loan.
  • Be prompt and consistent with your repayment.
  • Be prepared to offer collateral if it makes the agreement more comfortable for your friend.

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Frequently Asked Questions (FAQs)

1. What is a personal loan agreement letter between friends?

A personal loan agreement letter between friends is a legally binding document outlining the terms and conditions of a loan between two individuals who are friends. It should include details such as the loan amount, repayment schedule, and any interest or fees associated with the loan.

2. Why is a personal loan agreement letter between friends important?

A personal loan agreement letter between friends is important because it serves as a written record of the loan terms and can help prevent misunderstandings or disputes between the parties involved. It also establishes a clear repayment plan and can help protect the lender’s financial interests.

3. What should be included in a personal loan agreement letter between friends?

A personal loan agreement letter between friends should include details such as the loan amount, repayment schedule, interest rate (if applicable), late payment fees, and any other terms and conditions associated with the loan. It should also include the names and contact information of both parties involved.

4. How can I enforce a personal loan agreement letter between friends?

If a personal loan agreement letter between friends is not honored by the borrower, the lender can take legal action to enforce the terms of the agreement. 

This may include filing a lawsuit in small claims court or seeking assistance from a collection agency. However, it’s always best to try to resolve the issue informally before taking legal action.

5. Can personal loan agreement letter between friends be used in court?

Yes, personal loan agreement letter between friends can be used as evidence in court if a dispute arises. 

It serves as a written record of the terms of the loan and can help establish the lender’s legal rights to repayment. It’s important to ensure that the agreement is properly executed and meets all legal requirements.