Free IOU Template

An IOU, or “I Owe You”, is used by someone borrowing money (the “borrower”) to officially document that they owe someone (the “lender”) a debt.

While an IOU is less formal than a promissory note, it is still a legally binding document that can be used in court, if necessary.

Table of Contents

What Is an IOU?
When Do You Need an IOU?
The Consequences of Not Using an IOU
The Most Common IOU Relationships
What Should You Include in Your IOU?
Sample IOU

1. What Is an IOU?

An IOU is a written promise to repay a debt owed. Like a promissory note, this document recognizes a legally binding relationship between two parties — a Lender and a Borrower.

As a reference, people often call this form by other names:

“I Owe You” Form
Debt Acknowledgement Form
Registered Warrants

A Lender and Borrower are also known by other names:

Lender	Borrower
Seller	Buyer
Payee	Payer
Obligee	Obliger
Promisee	Promisor
Holder	Debtor
Bearer	Endorser
Service Provider	Customer
Creditor	Debtor

An IOU is similar to a promissory note and a loan agreement, but it is usually not a negotiable document and does not contain details about repayment and consequences of not repaying.

Here is a simple chart explaining the difference between an IOU, promissory note, and loan:

IOU	Promissory Note	Loan
promise to pay	promise to repay	promise to repay
	steps for repayment	steps for repayment
	timeline to repay	timeline to repay
	legally binding	legally binding
	signature of borrower	signature of borrower
		signature of lender
		repay in installments
		consequences of defaulting (i.e. right to foreclose)

2. When Do You Need an IOU?

An IOU allows both parties to record the amount of money borrowed and clarify when the money should be repaid. Even if you are family, friends, or colleagues, it helps everyone remember exactly how much money was borrowed in case memories fade.

Here are some common situations when this document may be needed:

You have done business with someone in the past and are willing to take an IOU
You do not have enough for an item so you give an IOU for the remaining amount
You want to borrow money for a down payment for an event like a wedding or party

3. The Consequences of Not Using an IOU

What happens if I don’t use an IOU?

A basic IOU clearly spells out how much money was borrowed, as well as when it should be repaid and with interest, if any.

Without this document, either the lender or the borrower may become frustrated if the other party does not fulfill his or her promise to give money or repay money.

Here is a chart of some of the preventable suffering an IOU could prevent:

Lender	Borrower
Unable to enforce a verbal promise	Unpaid expenses
Expensive lawyer fees to: 1. defend undocumented promise to pay 2. recover money unpaid	Expensive lawyer fees to: 1. demand undocumented promised money 2. pursue money promised
Loss of friendship or family trust	Loss of friendship or family trust
Personal safety & wellbeing	Personal safety & wellbeing

4. The Most Common IOU Relationships

Who needs to use an IOU?

Anyone lending or borrowing money for business or personal reasons should use a written form to protect themselves from unnecessary headache. Further, lenders and borrowers do not have to be individuals. Because of the debt crisis, governments like Greece could even issue temporary IOUs or “scrip” for its outstanding debts. Also known as “registered warrants”, these documents help the government conserve cash for outstanding debts.

Legal Templates provides a free IOU template for everyday situations where you want a written record that money was borrowed or loaned.

5. What Should You Include in Your IOU?

A simple IOU will identify the following basic elements:

- The “Amount”: the amount of money being borrowed
- The “Due Date”: when the Borrower should pay back the Lender
- Name of “Lender”: the party giving the money and will get repaid
- Name of “Borrower”: the party receiving the money and will repay the Lender

If you are thinking of lending money to a friend or family member there are other, more formal options than this form including a promissory note or loan agreement. Learn the difference between an IOU form, a promissory note, and a loan agreement.

4. Sample IOU

Below is a sample IOU document you can download in PDF or Word format.

IOU

Loan Amount: $_____________

Date: ____________________, 20______

FOR VALUE RECEIVED, the undersigned, ___________________________________ (the “Borrower”), hereby promises to pay to the order of ___________________________________ (the “Lender”), the principal sum of $_____________ together with interest on the principal balance, and in accordance with the terms set forth below.

Payment. The principal amount of this Note together with accrued and unpaid interest and all other charges, costs and expenses, is due and payable: (Check one)

☐ On demand of the Lender.

☐ In one lump sum payment on or before ____________________, 20______.

☐ In installment payments on or before ____________________, 20______.

Each successive payment is due on the __________ day of each (Check one) ☐ month

☐ quarter ☐ half-year ☐ year.

☐ In installment payments with a final balloon payment on or before __________________, 20______.

Each successive payment is due on the __________ day of each (Check one) ☐ month

☐ quarter ☐ half-year ☐ year. The final lump sum balloon payment of $___________ at the end of the loan term is due and payable on or before ____________________, 20______.

All payment under this Note are applied first to accrued interest and then to the balance of the outstanding principal.

Interest. (Check one)

☐ The principal balance shall NOT bear interest.

☐ The principal balance of this Note shall bear interest at the rate of __________% per annum, accruing daily from the date of this Note to and until maturity. Notwithstanding, the total interest charged on the principal amount shall not exceed the maximum amount allowed by law and the Borrower shall not be obligated to pay any interest in excess of such amount.

Guaranty. ________________________ (“Guarantor”) promises to unconditionally guarantee to Lender, the full payment and performance by Borrower of all duties and obligations arising under this Note. Guarantor agrees that this guaranty shall remain in full force and effect and be binding on Guarantor until this Note is satisfied.

Successors and Assigns. This Note will inure to the benefit of and be binding on the respective successors and permitted assigns of the Borrower. The Borrower may not assign its rights or delegate its duties under this Note without the Lender’s prior written consent.

Joint and Several Liability. If there is more than one Borrower of this Note, the obligation of each Borrower shall be joint and several under this Note.

Amendment. This Note may be amended or modified only by a written agreement signed by the Borrower and Lender.

Severability. In the event that any of the provisions of this Note are held to be invalid or unenforceable in whole or in part, the remaining provisions shall not be affected and shall continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Note.

Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of _________________.

IN WITNESS WHEREOF, the undersigned has executed this IOU as of the date first stated above.

SIGNATURES


Borrower Signature		Borrower Full Name


Borrower Signature		Borrower Full Name


Guarantor Signature		Guarantor Full Name