Other than the banks and loan firms, when people borrow money from their friends, coworkers and relatives, they don’t sign a legal contract or loan agreement with them. This is not necessary when you deal with a close friend or relative and you believe that they will return the debt in time as they agreed. But, just to make sure, you should ask them to sign a debt acknowledgment and state in the letter that they in fact borrowed the money for a specific period of time and they will return it to you in the mentioned period of time.
Description of Debt Acknowledgement Letter:
Sometimes there are some financial operations that are not very important or of high priority and in order to keep things simple and less complicated, people usually don’t go through the proper legal channel with these common transactions. Instead, they use IOU letter which is also known as the I Owe You letter or debt acknowledgement. This is a simple letter that is sent by the debtor to the creditor stating that he in fact borrowed the mentioned amount of money from the creditor and he agreed to pay back the loan within agreed period of time. This letter or acknowledgement is used as a legal proof of the deal or transaction between the creditor and debtor along with the specific amount of debt that the borrower owes to the creditor and the time duration in which the debtor is agreed to pay back his debt in full.
Uses of Debt Acknowledgement Letter:
When it comes to debt and loan, everyone knows that you need personal guaranty or some kind of collateral as the insurance of the debt return because it is possible that if its unsecured debt, you won’t get your money back from the debtor. But, this is only necessary when you want to get loan from a bank or loan company where in routine life, if you need a small amount of money for a short period of time, you can just ask your friends and borrow it from them. As the creditor if you give money to your friends or relatives without a legal agreement, it is important that you ask them to acknowledge the debt by sending you a formal acknowledgment letter and mentioning that they owe you the money in the letter. This way if the debtor denies paying back the loan or asks to take some more time, you can just use the acknowledgement for legal purposes i.e. to file a case against him.
Key elements to include in the Debt Acknowledgement Letter:
- Name of the debtor (borrower) with complete address
- Name of the creditor (who lend the money to debtor)
- Details of the debt
- Date when the debt was received by the debtor
- Details of the mutual agreement of return of the debt
- Date when the acknowledgement is written and send by the debtor
- Signature of the debtor
Here is preview of a Free Sample Debt Acknowledgement Letter created as fill-able PDF Form,
Here is download link for this Debt Acknowledgement Letter,