Most personal loans between friends and family start with nothing in writing, and most disputes about them start with the question of whether the money was a loan at all. An IOU answers that question in one signed page: who owes whom, how much, since when, and when it comes back.
This template produces a clean, signed IOU with the amount, the repayment terms, and an optional interest line, the minimum record that makes a personal debt provable.
IOU vs. promissory note vs. loan agreement
- IOU: acknowledges that a debt exists and states the basic repayment expectation. Best for small, simple personal debts where trust is high and the paper is insurance.
- Promissory note: an unconditional written promise to pay, with interest, a payment schedule, default terms, and often late fees. The standard for real lending, and enforceable on its own terms.
- Loan agreement: a full two-party contract adding representations, collateral, and remedies. For larger amounts or business lending.
The practical rule: an IOU for the debt everyone remembers, a promissory note when there is a payment schedule to enforce, and a loan agreement when the amount justifies full contract treatment.
Is an IOU legally enforceable?
Generally yes, as evidence of a debt. A signed IOU establishes the two facts every collection case turns on: that money changed hands and that repayment was expected. Courts, including small claims courts, treat it as strong evidence of a loan. What a bare IOU lacks is machinery: without a due date, the debt is repayable within a reasonable time, which is vague; without interest and default terms, there is nothing to accelerate. This template closes the biggest gap by making repayment terms a required choice, because the due date is what converts "you still owe me" into "you are in default as of this date."
Watch the statute of limitations
Written debts carry a limitations period of roughly three to ten years depending on the state, usually running from the missed due date. A dated IOU with a due date makes the deadline calculable; an undated verbal loan makes it arguable.
Lending inside the family without wrecking it
The IOU's real audience is often not a judge but the family itself: the sibling who remembers a gift, the estate that finds an undocumented transfer. A signed IOU keeps the memory honest in both directions, it proves the debt for the lender and proves the terms for the borrower. If repayment stalls, escalate in steps: a payment plan agreement restructures the debt cooperatively, and a demand letter for payment creates the formal record that precedes small claims court. Large intra-family loans also have tax angles: the IRS can treat interest-free loans above the annual gift exclusion as gifts or impute interest, which is a reason to document larger loans as notes with a stated rate.
Frequently asked questions
Is a handwritten IOU valid?
Yes. There is no required form: a dated, signed writing that identifies the parties and the amount is an IOU whether typed or handwritten. Typed versions are simply easier to read, harder to misquote, and less vulnerable to the claim that a number was altered.
Does an IOU need to be notarized or witnessed?
No. The borrower's signature is what matters. Notarization adds proof that the signature is genuine, which can help if the borrower later denies signing, but it is not required for the IOU to serve as evidence of the debt.
Can I charge interest on an IOU?
Yes, if the IOU says so; this template includes an optional simple-interest line. Keep the rate within your state's usury limits for private loans. Silence means no interest: courts do not add interest to a personal debt that never mentioned it, except sometimes after a judgment.
What happens if the borrower does not pay?
The IOU becomes the core exhibit. The usual path is a written demand letter, then small claims court, where the signed IOU plus proof the money moved (a bank transfer, a canceled check) typically decides the case. Small claims limits range from about $2,500 to $25,000 depending on the state.
Is money between family members a loan or a gift?
Whichever the evidence says. The presumption often leans toward gift between close relatives, which is exactly why the IOU matters: a signed acknowledgment that repayment is expected rebuts the gift assumption on the spot, for courts and for the rest of the family.