Does a loan agreement need to be signed by a notary or witnessed?

For most unsecured commercial loans between businesses or between individuals, a written and signed agreement is sufficient — notarisation is not required under English, Irish, or Scottish law. However, if the loan is secured by real property, many jurisdictions (including France, Spain, and Germany) require notarisation for the security instrument, even if the underlying loan agreement does not. Always verify local requirements before execution.

What is the difference between a loan agreement and a promissory note?

A promissory note is a simpler, unilateral promise by the borrower to repay a sum. A loan agreement is a bilateral contract signed by both parties, setting out obligations on both sides (including the lender's obligation to advance funds). Loan agreements are more comprehensive and better suited to complex or large-value transactions. Promissory notes are often used for simpler, short-term loans.

What interest rate should I include in the loan agreement?

The interest rate depends on your jurisdiction, the nature of the loan, and commercial negotiation. For commercial loans in most EU jurisdictions there is no fixed cap, but courts may void rates that are significantly above market (usury rules apply in Germany, France, Spain, and others). Check the current ECB base rate and published market rates as a reference point. For consumer loans, jurisdictions publish maximum rates (e.g., taux d'usure in France) — exceeding them voids the interest clause.

What happens if the borrower misses a repayment?

The loan agreement should specify: (1) a grace period (e.g., 5–10 business days), (2) a default interest rate (typically a fixed percentage above the standard rate), and (3) whether a missed payment constitutes an 'event of default' that triggers acceleration of the full outstanding balance. Without these provisions, the lender's remedies on default are limited to recovering only the missed instalment.

Do I need a lawyer to draft a loan agreement?

For straightforward personal loans between individuals or simple business loans of modest size, a well-drafted template like this one may be sufficient as a starting point. For loans above €10,000, cross-border loans, secured loans, or any loan to a consumer, we strongly recommend having the agreement reviewed by a qualified lawyer in the applicable jurisdiction. Akordans' AI Contract Review (€19) can flag jurisdiction-specific risks before you consult a lawyer, reducing the time and cost of that review.

What security can a lender take over a loan?

Common security interests include: a personal guarantee (a third party agrees to pay if the borrower defaults), a charge over assets (e.g., bank accounts, IP, equipment), a mortgage over real property, or a pledge of shares. The effectiveness of each depends on jurisdiction-specific registration requirements — for example, charges over UK company assets must be registered at Companies House within 21 days, or they are void against a liquidator. Unregistered security is effectively worthless on insolvency.

How is a loan agreement enforced if the borrower refuses to pay?

If the borrower defaults, the lender must follow the dispute resolution clause in the agreement. Most commercial loan agreements specify mediation then arbitration (or litigation as a fall-back). A well-drafted mediation clause — such as the Akordans clause included in this template — can resolve payment disputes in days rather than months, and at a fraction of litigation cost. If mediation fails, the lender may pursue a court judgment, which can then be enforced against the borrower's assets.

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Free — Professional Template

Loan Agreement

Agreement for a loan between parties covering amount, interest, repayment schedule, and default.

Content guidance reviewed for accuracy. This template is for informational purposes only and does not constitute legal advice. Consult a qualified lawyer for your jurisdiction before executing any loan agreement.

What is a loan agreement — and when does each clause matter?

A loan agreement is a binding contract between a lender and a borrower that sets out the amount lent, the cost of borrowing (interest), how and when the money is to be repaid, what happens if the borrower defaults, and what security (if any) the lender holds. Unlike an informal IOU, a properly drafted loan agreement is enforceable in court and protects both parties if the relationship breaks down.

Loan Amount

Specifies the principal sum and the drawdown mechanism. A precisely defined amount avoids disputes over whether additional transfers were gifts or loans.

Interest Rate

Sets whether interest is fixed or variable, how it accrues (daily, monthly), and the compounding method. Many jurisdictions impose usury caps — always verify the cap before agreeing a rate.

Repayment Schedule

Defines due dates, instalment amounts, and the final maturity date. A bullet repayment (lump sum at maturity) differs fundamentally from amortising instalments; use the wrong structure and cash-flow projections break down.

Events of Default & Remedies

Lists triggers that accelerate the loan (making all sums immediately due) — e.g., missed payment, insolvency, material breach. Acceleration is the lender's most powerful remedy; it must be drafted carefully to avoid triggering unintentionally.

Security / Collateral

Documents any charge, pledge, or guarantee securing repayment. Without a properly registered security interest, the lender ranks as an unsecured creditor on insolvency — behind tax authorities and preferential creditors.

Dispute Resolution

Specifies whether disputes go to litigation or arbitration, and in which jurisdiction. An Akordans mediation clause can reduce the cost of resolving payment disputes by 80% compared with court proceedings.

Use this template for any loan above a de minimis amount — including business loans between companies, director or shareholder loans, loans between private individuals, and bridging finance. For consumer-credit loans (i.e., loans to individuals for personal, household, or family use), additional statutory protections apply in almost every jurisdiction, and you should seek specialist legal advice.

Jurisdiction notes

Loan rules vary materially by country. Select your jurisdiction to see the key considerations.

General informational guidance only. Not legal advice.

England & Wales

English law offers broad freedom of contract on loan terms. There is no statutory interest cap for non-consumer commercial loans. Consumer credit is regulated by the Consumer Credit Act 1974 and FCA rules — this template is not suitable for regulated consumer-credit agreements.

No usury cap for commercial loans, but excessive rates may be challenged as an 'unfair relationship' under s.140A CCA 1974.
Security over land requires registration at HM Land Registry; charges over company assets require filing at Companies House within 21 days.
The Limitation Act 1980 gives a lender six years from the date a debt falls due to commence proceedings.

What's included

Loan Amount

Interest Rate

Repayment Schedule

Prepayment

Security

Representations

Events of Default

Remedies

Dispute Resolution

Governing Law

Need more than a template?

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Both parties get their own private AI legal assistant. Negotiate and draft a bespoke loan agreement with full regulatory research for your jurisdiction.

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Loan agreement — frequently asked questions

How to complete and sign a loan agreement

Follow these six steps to go from blank template to executed, enforceable agreement.

1
Identify the parties precisely
Use full legal names — not trading names or nicknames. For companies, include the registered number and jurisdiction of incorporation. Incorrect party identification is the most common cause of enforceability problems.
2
Define the loan amount and drawdown mechanism
State the principal sum in numerals and words. If funds are advanced in tranches, set out the drawdown schedule, any conditions to drawdown (e.g., delivery of security), and whether undrawn amounts expire.
3
Set the interest rate and check usury limits
Agree a fixed or variable rate. If variable, specify the reference rate (e.g., ECB base rate plus a margin). Before finalising, verify the applicable jurisdiction's usury cap — a rate above the cap is void in France, Germany, and Spain.
4
Draft the repayment schedule
List each instalment date and amount in a schedule, or include an amortisation formula. Specify what happens to partial payments (whether applied to principal, interest, or fees first), and the final maturity date.
5
Agree on security and complete any registration
If the loan is secured, attach the security document and complete any required registration before or promptly after drawdown. Unregistered security may be void against third parties or on insolvency.
6
Sign and retain executed copies
Both parties must sign — electronic signatures are valid in most jurisdictions for commercial loan agreements. Retain at least one original (or certified electronic copy) each. Set a reminder for each repayment date and for any notice period before maturity.

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