How to Write an I Owe You

An "I Owe You," generally expressed using the initials "IOU," is an informal document that states the terms and agreements of a loan between two parties. When it comes to repaying financial obligations, some people, especially family members, can practice "selective memory." In the future, that person who received the loan might not remember borrowing any money or may remember that he owes a much smaller amount than the original loan.


IOU Format

An IOU is generated when one person lends money to another person and eventually requires repayment of the loan by a certain date. For both the borrower and lender, an IOU establishes a written record of the loan transaction and most importantly, this document clearly states the repayment terms. Creating an IOU is simple and does not require an expensive law service. In fact, pre-printed IOU forms are available from most office stores. Some IOUs are simple and only contain an amount and the name of the parties. As an informal agreement, IOUs are usually completed without the benefit of a signed witness or legal notary.


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An IOU also can be used when one person receives goods or services from another person and arranges to pay for the transaction at some future date. The receiver would issue an IOU in exchange for the value of goods and services stating how much is owed and when the debt must be repaid.

What to Include in an IOU

The IOU note should clearly define the loan terms for both lender and borrower. There are several items that should be included in any legal IOU:

  • State who is lending the money and who is borrowing the money. Each party must acknowledge and accept the terms of the note by signing it.
  • Identify all terms of the agreement, including any interest that would accompany the repayment of that loan. Loans can be provided with or without interest.
  • Clearly show the date of the loan and the repayment date. The terms of the loan also may be included outlining monthly payment amounts and due dates. The lender might choose to make that the loan payable on demand.




An IOU is not as comprehensive as a formal promissory note. A promissory note is a legal agreement and may include an amortized payment schedule, stating the reasons for the loan, balloon payments, collateral and consequences for the borrower in the case of a default.

Storing the IOU and Documentation

Keep the original IOU in a safe place. When possible, make a copy of the IOU and keep the copy at another location. Preserving a scanned copy stored online also is a good idea. At the time of the loan, make a note on how the funds changed hands, listing if the loan was paid in cash, check, money order or another type of value. Be sure to record the details of the payment such as the check number. Keep all receipts. If a bank wire was used to send the funds, maintain a copy of the wire receipt with the IOU.



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