How to write an IOU: step by step with a sample

If you are about to hand over money, or receive it, you probably want something written down tonight, not a legal seminar. Here is how to write an IOU that is short, fair and clear enough that neither of you has to rely on memory later. We will go field by field, then give you a sample IOU to copy, then cover signing and storing it.

Before you work out how to write an IOU, agree the deal

Learning how to write an IOU takes ten minutes. Agreeing what goes in it is the real work, and it is better done out loud, face to face or on a call, than by passing drafts back and forth. Settle these four questions first: the exact amount, how it will be repaid, whether there is any interest, and what happens if a payment will be late.

If you are still on the fence about lending at all, step back and read how to lend money to a friend first. An IOU makes a good loan clearer. It cannot make a bad loan good.

One more thing before the steps. People searching for how to write an IOU often expect a legal form with boxes and fine print. You do not need one. A clear page in plain sentences, which both of you understand without a dictionary, is better than a borrowed form full of clauses neither of you would be able to explain. Plain words are also easier for anyone else to read if they ever have to.

Step 1: Title and date

Start with a plain title, “IOU” or “Loan acknowledgment and repayment plan,” and the date you are writing it. If the money moved on a different day, you will record that separately in step 3. Two dates are better than one when they are different; mixing them up is a classic source of confusion.

Step 2: Both full names

Use full legal names, as they appear on an ID. Label the roles: “Borrower: Taylor Brooks” and “Lender: Sky Moreno.” Add a city, or an email address, if either name is common. Nicknames feel friendlier, but they are the first thing a stranger would question.

Step 3: The amount, how it was paid, and when

Write the amount in numbers and words: “$900 (nine hundred dollars).” Then say how and when it was handed over: “by bank transfer on October 3, 2026.” This one line connects the paper to a real movement of money that your bank can confirm. If it was cash, write “in cash” and have the borrower initial that line.

Step 4: The promise to repay

This is the line that turns “I owe you” into “I will pay you back.” Use those words: “Taylor promises to repay Sky $900.” The Uniform Commercial Code, which most states follow for formal notes, treats a mere acknowledgment of a debt differently from a promise to pay it. For a friendly IOU the distinction is mostly about clarity. It still costs you nothing to say it plainly.

Step 5: The repayment plan

Choose one of two shapes. A lump sum is one payment on one date: “in full by December 15, 2026.” An installment plan is a series: “$150 on the 1st of each month, from November 1, 2026 to April 1, 2027.” For anything over a few hundred dollars, installments are usually kinder and more realistic.

Match due dates to the borrower’s paydays. A due date two days after payday gets paid; a due date two days before payday gets apologized for. Our guide to making a repayment schedule both people can stick to goes deeper on the numbers.

Step 6: Interest, prepayment and the late-payment rule

Three short lines cover a lot of ground:

• Interest. Write “No interest” or a specific rate. Most loans between friends have none, and that is fine. Each state caps interest under its usury laws, and the caps vary, so check before you add a rate. Interest you receive is generally taxable income, according to the IRS.
• Paying early. “The borrower may repay early at any time without penalty.” This keeps things simple and friendly.
• If a payment will be late. “The borrower will tell the lender before the due date, and both will agree a new date in writing.” This one sentence prevents more drama than any penalty clause.

We would skip late fees between friends under $1,000. They rarely get paid, and they shift the tone from “we have a plan” to “you are on probation.” If you do want one, keep it small and state it exactly.

Step 7: Signatures, dates and copies (the last part of how to write an IOU)

The borrower must sign. We strongly recommend the lender signs too, because it shows that both of you accepted the same terms. Each person dates their own signature. Then make sure each of you has an identical copy: a clear photo of the signed paper, or the signed file if you did it electronically. Electronic signatures are generally valid in the US under the federal ESIGN Act and state electronic transaction laws; our piece on electronic signatures for personal loans covers the details and exceptions.

Sample IOU template you can copy

Here is the full IOU template, using Taylor and Sky’s $900 loan as the example. Replace everything in square brackets. Keep the structure, even if you change the wording.

IOU AND REPAYMENT PLAN

Date written: [October 3, 2026]

Borrower: [Taylor Brooks], [city or email]
Lender:   [Sky Moreno], [city or email]

1. Loan
The Lender lent the Borrower $[900] ([nine hundred]
dollars) by [bank transfer] on [October 3, 2026].
Purpose (optional): [car insurance renewal].

2. Promise to repay
The Borrower promises to repay the Lender $[900].

3. Repayment plan
[6] payments of $[150], due on the [1st] of each month,
from [November 1, 2026] to [April 1, 2027].
Payments by [bank transfer / payment app / cash].

4. Interest
[No interest.] / [Interest of [x]% per year, simple.]

5. Paying early
The Borrower may repay early at any time, no penalty.

6. If a payment will be late
The Borrower will tell the Lender before the due date.
We will agree a new date and record it in writing.

7. Changes
Any change to this plan is valid only if written
and signed or confirmed by both of us.

By signing, we both agree to the terms above.

Borrower: ____________________  Date: __________
Lender:   ____________________  Date: __________

That is the whole thing. It fits on one page, and every line answers a question people actually end up asking. If you want a longer document with more clauses, such as what happens on default or how notices are sent, use our personal loan agreement template instead.

How to write an IOU for three common situations

The sample above covers the usual case: one loan, one borrower, a monthly plan. Real life has variations. Here is how we would adjust it.

A one-time loan, repaid in a single payment

Your sister needs $400 for a flight and will repay it after her next paycheck. Replace section 3 with one line: “The Borrower will repay $400 in full by [date].” Keep the late-payment sentence. Short loans are where people skip writing anything at all, and short loans are also where “I thought you said it was a gift” tends to come up.

A roommate covering a shared bill

You paid the full $1,300 security deposit and your roommate owes half. Write the purpose clearly (“Borrower’s half of the security deposit for [address]”) and consider what happens when the deposit comes back at move-out. One extra line handles it: “If the deposit is returned before this IOU is repaid, the Borrower’s share of the refund goes toward the balance.”

A cash loan with no bank record

Cash leaves no trail, so the IOU has to carry more weight. Write “received in cash” next to the amount and have the borrower initial it. Ask for repayments by transfer if possible, so at least that side of the story has a record. If repayments are in cash too, write a quick dated receipt each time, signed by the lender.

Whatever the situation, the core of how to write an IOU stays the same: names, amount twice, a promise, dates, and two signatures. Everything else is adjusting the plan to fit real life.

How to use an IOU template without breaking it

Templates go wrong in predictable ways. Here is how to avoid the common ones when working out how to write an IOU from a sample:

• Delete the options you are not using. Leaving “[No interest.] / [Interest of x%]” in the final version is an invitation to argue later.
• Check the arithmetic. Six payments of $150 is $900. If the numbers do not add up, the document contradicts itself.
• Fill in every date. “The 1st of each month” with no start or end month is surprisingly ambiguous.
• Do not add clauses you do not understand. If you copy a phrase like “confession of judgment” or “acceleration” from somewhere else, know what it means and whether your state allows it.
• Initial any handwritten change. Both of you, next to the change, with the date.

How to write an IOU: paper or app?

Both work. The question is which one you will still be able to find, and agree on, in a year.

An app covers those gaps. In IOUEZ, you enter the same fields as the sample above, the other person reviews and signs on their own device, and once both have signed the main terms are locked. Payments are recorded against the agreement, the balance updates for both of you, and reminders go out around due dates. If you need an installment plan, it is built in. The features page lists what is included in each plan.

After signing: three habits that keep it clean

Knowing how to write an IOU is step one. What you do over the next few months decides whether it stays a calm record or becomes a source of friction.

1. Record every payment the day it arrives, with the amount, date and method. Note it as “IOU payment 2 of 6” so nobody confuses it with splitting a pizza.
2. Write down any change to the plan and have both people confirm it. A text that says “Agreed: March payment moves to March 20” is far better than nothing.
3. Close it properly. When the last payment lands, mark it paid in full in writing. Our guide on how to close an IOU includes a short paid-in-full note.