Loan Agreement Template (India) — Free Format
A loan agreement records the amount lent, interest, repayment schedule, security and what happens on default. This template is for loans between individuals or from a company to another business; regulated lenders must also follow RBI rules such as the Key Fact Statement.
Stamp, registration and e-sign at a glance
The three things to settle before anyone signs this agreement in India.
Payable under the stamp law of the state where it is signed; rates vary by state. Unstamped, it cannot be used as evidence until duty and penalty are paid. Loan agreements and promissory notes have separate duties in most states.
Check your state's rateRegistration is not required unless the loan is secured by a mortgage of immovable property.
This agreement can be signed electronically with Aadhaar eSign or a DSC under the Information Technology Act, 2000. Electronic signatures listed in the Act's Second Schedule carry a presumption of reliability. A promissory note (a negotiable instrument) cannot be e-signed.
What cannot be e-signedWhat is a Loan Agreement?
A written loan agreement proves the debt, the agreed interest and the repayment terms. It makes recovery easier: a written acknowledgement of debt also extends the limitation period under Section 18 of the Limitation Act, 1963.
When to use it
- Lending money to a friend, relative or business associate
- A director or shareholder lending to a private company
- Inter-corporate loans between group companies
Key clauses checklist
Make sure your draft covers each of these. Linked clauses open a sample wording with drafting tips.
- Amount, disbursement and interest Sample clause
- Repayment schedule and prepayment
- Events of default
- Security or guarantee
- Notice Sample clause
- Governing law and jurisdiction Sample clause
Indian law notes
Money-lending laws
Several states regulate money-lending and may require a licence or cap interest for those in the business of lending. Occasional loans between individuals are usually outside these laws, but check your state.
Companies and deposits
A private company accepting money from directors or shareholders must follow the Companies Act, 2013 and the deposit rules, which treat some receipts as exempt only if conditions such as a director's declaration are met.
Cheques as security
Post-dated cheques given towards repayment are commonly used; if dishonoured, Section 138 of the Negotiable Instruments Act, 1881 may apply.
LOAN AGREEMENT This Loan Agreement is made at [City] on [Date] between: [Lender Name], [address], PAN [PAN] (the "Lender"); and [Borrower Name], [address], PAN [PAN] (the "Borrower"). 1. LOAN The Lender agrees to lend the Borrower Rs. [Amount] (the "Loan") for [purpose]. The Loan shall be disbursed by bank transfer to the Borrower's account [details] on [Date]. 2. INTEREST The Loan carries simple interest at [ ]% per year, calculated on the outstanding principal, payable [monthly / with each instalment]. [If interest-free, state: "The Loan is interest-free."] 3. REPAYMENT 3.1 The Borrower shall repay the Loan with interest in [ ] equal monthly instalments of Rs. [ ] each, starting [Date], as set out in Schedule 1. 3.2 The Borrower may prepay all or part of the Loan at any time without penalty. 4. SECURITY [Optional: As security, the Borrower has provided [post-dated cheques / guarantee by [Name] / pledge of [asset]].] 5. EVENTS OF DEFAULT Each of the following is an event of default: (a) failure to pay any instalment within [15] days of its due date; (b) any statement by the Borrower in this Agreement being untrue; (c) the Borrower becoming insolvent. On default, the Lender may by written notice demand immediate repayment of the whole outstanding amount, with default interest at [2]% per year above the agreed rate. 6. ACKNOWLEDGEMENT The Borrower acknowledges receipt of the Loan and the liability to repay it on these terms. 7. NOTICES Notices shall be sent to the addresses above by registered post and email. 8. GOVERNING LAW This Agreement is governed by the laws of India and the courts at [City] have jurisdiction. Schedule 1 – Repayment schedule: [table of dates and amounts] Lender: ____________ Borrower: ____________ Witnesses: 1. ____________ 2. ____________
Replace every [placeholder] and delete options that do not apply. Work out the repayment schedule with the EMI calculator
How to execute it
From blank template to a signed, stamped and stored contract.
Fix the amount, interest and repayment schedule.
Transfer the money through a bank so there is a record.
Stamp the agreement under state law and sign with witnesses.
Keep the agreement and bank proof safely; diarise instalment dates.
If payments stop, send a legal notice before filing a recovery suit.
Frequently asked questions
Is a loan agreement between friends legally valid?
Yes. A written loan agreement is enforceable as a contract and is strong evidence in a recovery suit.
How long do I have to recover a loan?
Generally three years under the Limitation Act, 1963, counted from when repayment fell due. A written acknowledgement of the debt by the borrower restarts the period.
Is interest on a private loan taxable?
Yes, interest received is income of the lender, and tax may need to be deducted at source in some cases.
Related templates
Stop emailing Word files around
Turn this format into an approved template, collect approvals, buy e-stamp paper, send it for Aadhaar eSign and get reminded before it renews.