Put the terms of an unsecured loan in writing

With an unsecured loan, there is no separate asset standing behind the debt, so much more turns on the wording of the agreement itself. The document is where the parties record the loan amount, when funds are advanced, whether interest applies, how repayment works, and what counts as default. If those points are vague, disagreements can arise later about what was actually promised. That is especially relevant for director loans, connected-party lending and private business loans where the relationship may start informally but the financial exposure is still real.

An unsecured loan agreement will usually set out the amount being lent, when the money is to be provided, the repayment dates or repayment method, and whether interest or default interest applies. It may also deal with early repayment, missed payments, notices, variation procedures and events of default. Because no security is being granted, the payment and default clauses often carry more weight than they would in a secured arrangement. If your deal includes staged advances, a grace period or an interest-free structure, those details should be built into the document clearly.

We usually need the names of the lender and borrower, the loan amount, when the funds will be advanced, whether interest is charged, and how repayment is meant to happen. It also helps to know whether there are any special points such as early repayment rights, deferred repayment dates, instalments, or consequences for late payment. This service is aimed at one unsecured loan for up to two parties. If the arrangement involves multiple lenders, multiple borrowers, security documents or a more layered funding structure, we may need to discuss a different scope first.

It can be. A free template may use broad wording that does not match the way your loan actually works, particularly if the deal is interest-free, repayable on demand, repayable in instalments, or being made between related parties. In unsecured lending, small wording differences can matter because the agreement is doing most of the legal heavy lifting. A generic form may also leave gaps around default, variation or early repayment. A lawyer-drafted agreement is based on your actual transaction rather than assumptions built into a standard online precedent.

For a straightforward unsecured loan, drafting is often completed within several business days once we have the key commercial details. After instruction, we gather the information needed for the document, prepare the draft, and then make any included changes through the amendment round if required. Timing can be longer where the loan terms are still being negotiated or where important details are unsettled. If the arrangement changes during the process, the document may need to be adjusted so it keeps pace with the final commercial position rather than an earlier version of the deal.

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