Is a family loan agreement legally binding?

Yes, if it is clear that you intended to create a legal obligation — which a signed written agreement shows. Without one, a court may presume a payment between close family members was a gift.

No, but a witness can help if the borrower later denies signing.

Does the lender need FCA authorisation?

Not for a one-off private loan between individuals. Lending money as a business is different and may be regulated by the Financial Conduct Authority.

What if the borrower does not repay?

Send a letter before action and, if needed, make a court claim. See our guide on recovering money you are owed.

Personal Loan Agreement (Family & Friends)

A written agreement for a one-off private loan between individuals — family or friends — in England and Wales: the amount, any interest, how and when it is repaid, and what happens if it is not.

Applies in England and Wales. General information, not legal advice — talk to a lawyer about your situation.

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Lending money to family or friends is common, and so are the arguments afterwards about whether it was a gift or a loan, and when it should be paid back. A short written agreement settles both.

This template is for one-off private loans between individuals in England and Wales, not for lending as a business.

When to use it

Lending a family member money towards a car, a deposit or a debt.
Borrowing from a friend and wanting to show you intend to repay.
Parents lending (not giving) money to an adult child.

How it works

Enter the lender and borrower — Full names and addresses of both people.
Set the amount and interest — Choose interest-free, or a fixed yearly rate.
Choose how it is repaid — One payment by a set date, or monthly instalments.
Sign — Both sign. A witness is optional but helpful if the loan is ever disputed.

Making it valid

Both the lender and the borrower sign. A witness is optional.
Transfer the money by bank transfer rather than cash, so there is a record that it was paid.

Common mistakes

Not writing anything down, so the loan later looks like a gift.
Leaving the repayment date open-ended.
Using this template for lending as a business — that may need FCA authorisation.

Questions

Is a family loan agreement legally binding?: Yes, if it is clear that you intended to create a legal obligation — which a signed written agreement shows. Without one, a court may presume a payment between close family members was a gift.
Do I need a witness?: No, but a witness can help if the borrower later denies signing.
Does the lender need FCA authorisation?: Not for a one-off private loan between individuals. Lending money as a business is different and may be regulated by the Financial Conduct Authority.
What if the borrower does not repay?: Send a letter before action and, if needed, make a court claim. See our guide on recovering money you are owed.