Lending money to a friend or family member always starts with good intentions. Yet it is one of the leading causes of family fallouts, and a large share of personal loans between relatives are never fully repaid. The good news: most problems come down to five mistakes that are easy to avoid.
Mistake #1: putting nothing in writing. "We're family, we don't need paperwork" is the sentence that precedes most disputes. Without a written document, you cannot prove the amount, the date, or even that it was a loan rather than a gift. A simple signed IOU solves the problem in five minutes.
Mistake #2: setting no repayment deadline. A loan with no due date is a loan that never ends. Agree on a precise deadline, or an installment plan (say, 100 per month), and write it down in the document.
Mistake #3: skipping the amount in words. On an IOU, the amount should appear both in figures and in words, ideally written by the borrower's own hand. If the two ever differ, the amount in words is the one that counts in most legal traditions.
Mistake #4: making only one copy. Each party should keep a signed original. If only the lender has one, the borrower can dispute it; if only the borrower has one, the lender has no evidence left.
Mistake #5: lending what you cannot afford to lose. The golden rule: never lend an amount whose loss would put you in difficulty. Even with a perfect document, recovering money can take time.
In short: a personal loan goes well when it is treated as seriously as a bank loan — with kindness on top. Our free IOU template generates the document in two minutes, no sign-up required.