Private Loan Agreement Ireland (Family and Friends)

A private loan agreement is a contract under which one person (the Lender) advances money to another (the Borrower), who promises to repay it on agreed terms. It is not regulated like a bank loan, because the lender is not in the business of lending. If nothing is written down, a court later has to rebuild the deal from bank statements and memory, and family memories rarely match. Irish courts also still apply a presumption of advancement to some transfers from parent to child, so money handed over without paperwork can be treated as a gift.

Unlike an IOU or acknowledgement of debt, which only confirms after the event that money is owed, a loan agreement is signed at the time of the advance and sets the whole framework, from interest and instalments to default. It also gives no security over property, which would need a mortgage, a solicitor and registration. It sits among our personal and family documents for Ireland; a club or charity lending money is not a private lender and should check its own rules first, such as a constitution drawn from our templates for Irish nonprofits and clubs.

The starting point is negative: the Consumer Credit Act 1995 does not apply. Its definition of "creditor" in section 2 covers a person who grants credit "in the course of his trade, business or profession", so a private individual lending once falls outside it. The same logic keeps a private lender outside the licensing regime for high cost credit providers, the term the Consumer Credit (Amendment) Act 2022 substituted for "moneylender".

Limitation periods shape the choice of form. Under section 11 of the Statute of Limitations 1957, an action on a simple contract must be brought within six years of the date the money fell due, while an action on an instrument under seal has twelve years. Since the Land and Conveyancing Law Reform Act 2009, an individual can execute a deed without a seal: section 64 requires the document to be expressed as a deed, signed in front of a witness who attests the signature, and delivered, and section 64(3) gives it the effect of a sealed document. A signed acknowledgement of the debt or a part payment restarts the clock under sections 56, 58 and 65. A guarantee cannot be enforced unless it, or a note of it, is in writing signed by the guarantor (section 2 of the Statute of Frauds 1695).

Tax is where most family loans go wrong. Under section 40 of the Capital Acquisitions Tax Consolidation Act 2003, a borrower who pays no interest, or less than a market rate, is treated as taking a gift every year equal to the value of that free use. Revenue's guidance on interest-free loans and the free use of property values the benefit at the best deposit rate the lender could have earned, and the annual small gift exemption can absorb it. Larger loans from close relatives must be reported on a CAT return under section 46(4A). Forgiving the loan, or letting it become statute barred, counts as a gift under the definition of "disposition" in section 2.

The classic case is the bank of Mum and Dad. When parents help with a house deposit, the mortgage lender asks whether the money is a gift or a loan. Most Irish lenders want a signed gift letter for deposit money and treat a repayable family loan as another debt, so a loan agreement must never contradict a gift letter given to the bank. Paperwork also protects the other children: when a parent dies, a documented loan is part of the estate, not an argument between siblings.

Couples are the second large group. Two parents often lend together and two partners often borrow together, so the template handles joint lenders, who lend in equal shares into one account, and joint borrowers, each liable for the whole balance even if the couple later separates.

Two situations call for extra care. Where the borrower has an uncertain income, for example on the kind of fixed-term job covered by our employment contract templates for Ireland, a lender may ask a third person to stand as guarantor, and the template then adds a full guarantee and indemnity. Where the money was paid before any paperwork, the agreement records the payment date. Anything lent to or by a company raises different tax and company law questions; start from our business templates for Irish companies and an accountant's review.

The opening clauses define the Principal, the Advance Date and the Lender Account and state the purpose. The money is either paid by transfer before a latest date, with the Borrower free to end the agreement if it never arrives, or acknowledged as received on a stated date. Interest is optional. A fixed rate is simple interest calculated daily on a 365-day year, payable with each repayment of principal and at least once every twelve months, and it never runs for a period before signature.

Repayment follows one of three models: regular instalments, one sum by a fixed date, or repayment on demand after a notice period you choose. In the on-demand version, nothing falls due until a written demand has been received. Early repayment is always allowed without a fee, and partial prepayments reduce the last instalments first. A statement of the balance, which the Lender may send up to twice a year, must be signed or disputed by the Borrower within 14 days; once signed, it is a fresh written acknowledgement of the debt.

Default works in two stages. A payment more than the agreed number of days late is an Event of Default, but the whole loan only becomes due after a written Acceleration Notice gives the Borrower a further 14 days to put things right. Late-payment interest is optional and replaces, rather than adds to, the normal rate. The guarantee, when selected, makes the guarantor liable to pay within 14 days of a written demand and requires his or her written consent to any increase in the principal or rate. Final clauses cover death, written release, notices and mediation.

The questionnaire starts with the people. You say if one or two people are lending and borrowing, then enter each name and address; a separate screen appears only when there is a second lender or borrower. Next come the amount and the purpose of the loan.

Once the loan is described, a screen asks if the money has already been paid, then asks for the latest transfer date or the actual payment date. You choose an interest-free loan or a fixed yearly rate, then instalments, one sum or repayment on demand, with the IBAN that receives repayments. Each repayment choice opens a short screen of its own.

After that you set the days of grace, decide on late-payment interest and tell us if a guarantor will sign. The last questions are the form of signature, deed or ordinary contract, and the date. Next and Back move you between steps while the preview on the right updates; after you click Finish and complete your order, the loan agreement is ready to download. Print it and, for a deed, have each signature witnessed by an adult who is not a party.

The mistake we see most is a family loan with no schedule and no document, followed years later by a dispute. A close second is the "repay when you can" arrangement: if a loan is repayable without any demand mechanism, the debt may be treated as due from the day it was paid, and six years later the lender may have lost the right to sue. Our on-demand option makes a written demand a condition of payment. People also forget that interest is taxable income of the lender, and that paying yearly interest to a lender living abroad can trigger a duty to deduct tax under section 246 of the Taxes Consolidation Act 1997.

Guarantees fail in predictable ways too. A guarantor who signs after the money has gone out, with no fresh promise from the lender, may have given an unenforceable guarantee; the template ties it to the agreed repayment terms instead. Writing off missed instalments informally can count as a gift for capital acquisitions tax and weakens any later claim. If the borrower is buying a home, check what the mortgage lender requires first, because the paperwork must tell the same story you told the bank. Borrowers who rent while saving will find leases and notices in our Irish tenancy and property documents.