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Document a personal, family, or small-business loan with clear terms, interest, and repayment schedule.
A loan agreement is a written contract between a lender and a borrower documenting the terms of a loan: the amount lent, interest rate, repayment schedule, and what happens if the borrower defaults. It converts a handshake loan into an enforceable debt — critical for family loans, inter-company loans, and small-business lending.
Common situations where this document is the right tool for the job.
A family member is lending money to another family member.
One business is lending to a related or independent business.
A director or shareholder is lending money to their own company.
A founder is lending pre-incorporation funds to their startup.
A friend is lending money and both parties want it documented.
You are formalising an informal advance that was originally undocumented.
The essential provisions every loan agreement should include.
Lender and borrower full legal names, ABNs (if applicable), and addresses.
Principal amount in AUD (or other currency) and, optionally, the purpose of the loan.
Fixed or variable interest rate, how interest accrues (daily, monthly), and whether interest compounds. Zero-interest loans should be explicitly stated — note the ATO may deem a market-rate interest for tax purposes on some zero-interest loans.
How the loan is repaid — lump sum on a specific date, fixed instalments, amortising schedule, or interest-only with balloon repayment. Due dates for each payment.
Whether the borrower can prepay without penalty. Most simple loans allow penalty-free prepayment; some lenders require minimum interest regardless of prepayment.
Whether the loan is secured (against a specific asset or by a personal guarantee) or unsecured. Secured loans need additional documentation (security agreement, PPSR registration).
What triggers default — missed payment, insolvency, breach of covenants, cross-default on other loans. The cure period before default is enforced.
On default, the full loan becomes immediately due; default interest rate applies; lender may enforce security. Lender's reasonable costs of recovery are payable by borrower.
Borrower acknowledges receipt of the loan amount; warranties about solvency and authority to borrow.
Which Australian state's law governs and where disputes are resolved.
A verbal loan is legally enforceable in theory but impossible to prove in practice. A written loan agreement makes the debt collectible in court if the borrower doesn't pay.
Loans are not income to the borrower and not tax-deductible to the lender. But the ATO needs evidence that a payment was genuinely a loan and not a gift or income. A written agreement is that evidence — and matters particularly for related-party loans.
Family loans ruin relationships more often than they repair them. A written agreement with clear repayment terms prevents the awkwardness and resentment that usually follows.
If a loan genuinely goes bad, the lender may be entitled to a capital loss or bad-debt deduction. Documentation is the baseline requirement — without it, the ATO will treat the loss as a non-deductible gift.
Yes. A loan agreement is an ordinary commercial contract under Australian law. Electronic signatures on it are recognised as valid under the Electronic Transactions Act 1999 (Cth)and the state-based equivalents (e.g. Electronic Transactions Act 2000 (NSW), Electronic Transactions (Victoria) Act 2000, Electronic Transactions (Queensland) Act 2001).
Under section 10 of the Commonwealth Act, an electronic signature is valid if it identifies the signer, indicates their intent to be bound, and uses a method as reliable as appropriate in the circumstances. SignBolt captures timestamp, IP address, and signer identity — which meets this "reliable method" test for ordinary commercial signing.
Certain document types are excluded from electronic-signing provisions in some states (wills, statutory declarations in some contexts, land titles documents). A loan agreement is not in those excluded categories — electronic signature is valid.
This page is general information, not legal advice. For high-value or unusual arrangements, obtain a one-off review from a qualified Australian legal practitioner.
Questions we get about the Loan Agreement template.
Yes. A loan agreement is an ordinary commercial contract. Written loan agreements are legally binding and enforceable in the state courts. Under the Electronic Transactions Act 1999 (Cth), loan agreements can be electronically signed and remain valid. For loans secured against specific assets, additional PPSR registration may be required to perfect the security.
Legally no — zero-interest loans are valid. However, zero-interest loans between related parties can attract ATO scrutiny: the ATO may deem a market rate of interest for tax purposes (fringe benefits tax on employee loans, Division 7A on shareholder loans from companies). Talk to an accountant before making a zero-interest related-party loan.
Division 7A of the Income Tax Assessment Act 1936 deems certain loans from private companies to shareholders (or their associates) to be unfranked dividends unless they are on Division 7A-compliant terms: written agreement, minimum interest rate (the ATO benchmark rate), and maximum term (7 years unsecured, 25 years secured). If you are a shareholder borrowing from your own company, the loan agreement must comply with Division 7A to avoid a tax bill.
Yes. Loans between individual family members (e.g. parent to adult child) can be interest-free without triggering tax consequences for either party — there is no equivalent of Division 7A for personal loans between individuals. Document the loan clearly so that if either party dies, the debt is visible to the estate. Interest-free loans from one family-owned company to another might trigger transfer pricing or Division 7A issues.
If the loan is substantial relative to the borrower's unsecured creditworthiness, yes. Security can be a specific asset (e.g. a car) registered on the Personal Property Securities Register (PPSR), a mortgage over real property, or a personal guarantee from a company director. Security gives the lender priority over unsecured creditors if the borrower becomes insolvent.
Yes. Loan agreements are covered by the Electronic Transactions Act 1999 (Cth). Electronic signatures are valid and enforceable. SignBolt produces a signed PDF with timestamped audit trail that is exactly the kind of evidence a court wants to see for enforcement.
A loan agreement is a two-way contract with obligations on both lender and borrower (often including lender's obligation to advance funds, reporting obligations, default remedies). A promissory note is a one-way instrument — an unconditional promise by the borrower to pay a specified sum to the lender on a specified date. Promissory notes are simpler but give less flexibility and fewer lender protections. Use a loan agreement for anything more than a simple one-off repayment.
Free plan covers 3 documents per month — more than enough to get this signed today. No credit card required.