How to Write an IOU Letter?
What is an IOU Letter?
The term IOU Is derived from “I owe you”. This letter is written in an event when a loan transaction is made between two parties, and all the pertinent specifics of loan are jotted down in it. Usually the letter would include names of the parties involved in the deal, date when the deal was made, and amount of the borrowed loan. Terms and conditions of the payment and due repayment schedule should also be mentioned, if possible. Lastly, both parties would sign the letter.
IOU letters or IOU notes are officially known as loan agreements or promissory notes in the legal system. An IOU letter is a succinct, petite form of a promissory note. A promissory note elucidates all the relevant details of a debt such as how one party owes debt to another party and as to when and how the debt will be paid off. If the party needs to be taken to court to receive payment, the IOU letter should be very comprehensive.
Why is it important to write an IOU letter?
It is vital to write an IOU letter, for the establishment purpose of a legal binding. It indicates that an agreement has been willfully made, and certain actions are now either required or forbidden.
Guidelines for Writing an IOU Letter
In case you’re wondering how to write an IOU letter, following these tips would be helpful:
Mention the Names of Promisor and Promisee
Mention the full name of the person who owes debt to another party. Name the party as “Promisor” every time the name reappears in the text. Write the full name of the person who gave the loan and then classify that person as “Promisee” in the entire document.
State the Essential Details
Leave two lines below from the start of this note and enumerate all the particulars relevant to the loan. Mention the dates of a promised, agreed- upon amounts, and also the penalty in case of late fees, if any.
Mention “Type” and “Kind” of Loan
Enlist any other supplementary info separately. Mention which kind of currency has been decided upon and whether the promissory note is secured or unsecured.
A loan is referred as "Secured,” when the loan given party mentions personal items, such as an automobile, as a security. If the loan payments are not completed on time, the party who took out the loan would then have to give up title, until completion of the payments.
Putting the Signatures of the Legally Bound
Lastly, end the letter with the “ Promisor’” and the “Promisee’s” signatures and mention the current date in front of a notary eyewitness. Ask the witness to endorse and finalize the letter. A copy of the letter will be given to both the parties for maintaining record.
Now that you’ve had an idea how to write an IOU note and how to write an IOU letter, you can well write them by following the mentioned guidelines.