Delaware Loan Agreement in minutes

What is a Loan Agreement?

A Loan Agreement is a legal contract between a lender and a borrower that sets out the amount being loaned, whether interest applies, and how and when the money will be repaid.

Unlike a simple IOU or a promissory note signed only by the borrower, a Loan Agreement is signed by both parties and records the full terms of the deal, which protects everyone if memories differ later.

When do you need one?

Put a Loan Agreement in writing any time meaningful money changes hands, even between people who trust each other. Common cases include:

• Lending money to a family member or friend
• A personal loan between private individuals
• A business borrowing from an owner, partner, or investor
• Financing a private purchase, like a car or equipment, over time
• Formalizing an existing informal loan so the terms are on paper

Types of Loan Agreements

The right structure depends on who is lending, how the money will be repaid, and whether anything secures the debt. We tailor the document to what you need, including:

• Personal loan: between individuals, often family or friends
• Business loan: between a company and an owner, partner, or third party
• Secured loan: backed by collateral the lender can claim on default
• Unsecured loan: based on the borrower's promise to repay alone
• Interest-free loan: principal only, common for family arrangements

What to include

A complete Loan Agreement leaves no room for doubt about what was borrowed and how it comes back. Make sure yours covers:

• Full names and addresses of the lender and the borrower
• The principal amount and the date the money is disbursed
• The interest rate, or a clear statement that the loan is interest-free
• The repayment schedule: installments or lump sum, amounts, and due dates
• Late payment fees and what counts as a default
• Whether early repayment is allowed without penalty
• Any collateral securing the loan
• Signatures of both parties and the date

Interest and repayment terms

Interest is where informal loans most often go wrong. State your rate clearly as an annual percentage, and check your state's usury laws, which cap how much interest a private lender can charge.

For repayment, spell out the exact schedule: how many payments, how much each one is, when they are due, and where the money should be sent. A clear schedule makes it obvious to both sides whether the loan is on track.

Common mistakes to avoid

• Lending on a handshake with nothing in writing
• Leaving the repayment schedule vague, like "pay me back when you can"
• Charging interest above your state's legal limit
• Not saying what happens if a payment is missed
• Forgetting to record payments as they are made
• Only the borrower signing, instead of both parties