Do I need a written agreement to lend money to family?
It is not legally required, but it is strongly advisable: it shows the money was a loan and records when and how it must be repaid.
Be Wise › Be Contract Wise guides › Private loan agreement
Private loan agreement (England and Wales)
A private loan agreement records a loan between individuals or businesses: the amount, interest (if any), repayment dates, what happens on default and any security or guarantee. Lending to individuals in the course of a business is regulated consumer credit, which needs FCA authorisation.
When you need one
Use one for any significant loan to family, friends or a business, so there is proof it was a loan rather than a gift and clear terms for repayment.
What it should contain
Loan amount
How much is lent and when it is paid over.
Interest
The rate, stated clearly as an annual percentage, or that the loan is interest-free.
Repayment
Instalments, a lump sum or repayment on demand.
Default
What happens if a payment is missed, including the whole balance becoming due.
Security or guarantee
Any charge over property or a personal guarantee.
Points specific to England and Wales
- Security over land in England and Wales is usually taken by a legal charge registered at HM Land Registry. A guarantee must be in writing and signed by the guarantor (Statute of Frauds 1677, section 4).
Different rules can apply elsewhere in the UK: see the Scotland version of this guide.
Common mistakes
- Lending as a business to individuals without FCA authorisation.
- No written terms, so the loan is later argued to be a gift.
- Taking security without completing the formalities that make it effective.
See a specimen private loan agreement — a short illustration of the structure and key clauses, laid out as the app produces them.
Quick answers
Is charging interest on a private loan legal?
Yes. But if you lend to individuals as a business, it is likely to be regulated credit requiring FCA authorisation.
Draft your private loan agreement now
Be Contract Wise's powerful, carefully prepared drafting tools turn a short set of plain-English questions into a private loan agreement under the law of England and Wales, laid out to a professional standard, with an explanation of every clause. Simple or complex, export to Word or PDF.
Start drafting — freeBrowse all guidesReviewed 2026-09-24. General legal information about the law of England and Wales, not legal advice.