June 27, 2026 · 4 min read

Lending Money to a Friend? Write an IOU

"Can I borrow $2,000? I'll pay you back next month." Three months later, you're still waiting. A written IOU protects your friendship — and your wallet.

Why Verbal Agreements Fail

You remember "I'll pay you back in two months." Your friend remembers "I'll pay you back when I can." Without writing, both versions are equally valid — and equally unenforceable.

What an IOU Must Include

Names of both parties, loan amount, repayment schedule, interest (if any), late payment terms, and signatures. Even a handwritten note with these elements is legally enforceable — but a typed, signed agreement is better.

Should You Charge Interest?

For small loans between friends, probably not. But for larger amounts, charging interest makes it feel more official — which means they're more likely to take repayment seriously. Even 1-2% signals this isn't casual.

What If They Don't Pay?

A signed IOU gives you the right to sue in small claims court. Having it in writing turns a "he said, she said" into a clear legal dispute with evidence. Most people pay up before it gets there.