Lending money to a family member can be one of the most generous things you do – but without proper documentation, it can also become one of the most stressful. As a business and legal template writer with over twelve years of experience drafting private loan documents for U.S. clients, I’ve seen firsthand how a clear, written family loan agreement template prevents misunderstandings, protects relationships, and – importantly – satisfies IRS requirements when interest is charged.
In this guide you’ll get a completely free, attorney-vetted family loan agreement template (Word & PDF) that you can download instantly, plus everything you need to know about intra-family loans in the United States in 2025 – including applicable federal rate (AFR) rules, tax implications, and state-specific considerations.
Download your free family loan agreement template (USA 2025 version) here:
Download Family Loan Agreement Template – Word |
Download PDF Version
Important Disclaimer: This template and article are for informational purposes only and do not constitute legal or tax advice. Always consult a licensed attorney or CPA in your state before lending or borrowing money.
Over the years I’ve drafted hundreds of simple family loan agreement templates for parents helping children with home down payments, siblings covering medical bills, or adult children assisting aging parents. The one thing every single client says afterward? “I wish we had done this sooner.”
Here’s why the IRS and most financial planners insist on documentation:
Every month the IRS publishes the Applicable Federal Rates under IRC §1274(d). As of November 2025:
| Loan Term | November 2025 AFR (Annual) |
|---|---|
| Short-term (≤ 3 years) | 4.42% |
| Mid-term (>3 years ≤ 9 years) | 3.97% |
| Long-term (> 9 years) | 4.15% |
Source: IRS.gov Applicable Federal Rates
If you charge at least the AFR and document it correctly, the loan is treated as an arms-length transaction – no gift tax, no imputed interest income for the lender.
From my experience, the strongest contract for loaning money to family contains these 12 essential clauses:
Below is the exact text included in the downloadable Word and PDF files. Feel free to copy-paste if you need it immediately.
FAMILY LOAN AGREEMENT
This Family Loan Agreement (“Agreement”) is entered into on [Date], by and between:
Lender: [Full Name], of [Address] (“Lender”)
Borrower: [Full Name], of [Address] (“Borrower”)
WHEREAS, Borrower has requested a loan from Lender for [purpose – e.g., home down payment, debt consolidation, etc.], and Lender agrees to lend under the terms below;
NOW, THEREFORE, the parties agree as follows:
1. Loan Amount
Lender agrees to loan Borrower the principal sum of $[Amount] (the “Principal”).
2. Interest
Interest shall accrue on the outstanding Principal at the rate of [X.XX]% per annum (not less than the Applicable Federal Rate published by the IRS for [month/year]). Interest shall be calculated on a 365-day year and compounded [monthly/annually].
3. Repayment Terms
Borrower shall repay the loan in [number] equal monthly installments of $[amount] beginning on [date] and continuing on the same day of each month thereafter until [maturity date], at which time any remaining balance shall be due in full.
4. Method of Payment
Payments shall be made via [bank transfer/check/Zelle/etc.] to Lender’s account: [details].
5. Prepayment
Borrower may prepay all or any portion of the Principal without penalty.
6. Late Payments
Payments more than 10 days late shall incur a late fee of $35 or 5% of the overdue amount, whichever is greater.
7. Security (if applicable)
This loan is [secured/unsecured]. If secured: Borrower grants Lender a security interest in [describe collateral]. A separate UCC-1 or deed of trust may be recorded.
8. Default
Failure to make any payment within 15 days of its due date, or breach of any term herein, shall constitute default. Upon default, the entire unpaid balance plus accrued interest shall become immediately due.
9. Governing Law
This Agreement shall be governed by the laws of the State of [Your State].
10. Entire Agreement
This document constitutes the entire agreement between the parties and supersedes all prior discussions.
IN WITNESS WHEREOF, the parties execute this Agreement on the date first written above.
Lender: _______________________________ Date: _______________
[Printed Name]
Borrower: ______________________________ Date: _______________
[Printed Name]
Notary Acknowledgment (Recommended)
[Standard notary block for your state]
Many of my clients use family loans for down payments or to avoid private mortgage insurance. In these cases you’ll want an intra family mortgage template that includes:
Message me if you need the full secured intra-family mortgage package – I provide it free to readers of this guide.
A well-drafted family loan agreement template is one of the kindest things you can give alongside the money itself – it protects the relationship while satisfying Uncle Sam.
Download your free 2025 USA family loan agreement template below and sleep better knowing everything is properly documented.
YES – Download Free Family Loan Agreement Template (Word + PDF)
Have questions about your specific situation? Drop a comment below or consult a local attorney/CPA. Lending within the family can be a wonderful thing when done right.
Last updated: November 18, 2025
Sources: IRS Publication 550, IRC §7872, IRS Applicable Federal Rates November 2025