Loan Agreement Generator

About the Loan Agreement Generator

Enter the lender, the borrower and, if there is one, a guarantor; the amount and how it was paid; and the interest — none, simple (flat) or reducing balance. Then choose how it is repaid: monthly instalments, one lump sum on a date, monthly interest with the principal at the end, or on demand. The generator writes the loan agreement — payment of the loan, interest, repayment, prepayment, late payment, security or guarantee, the borrower’s statements, events of default and acceleration, stamp duty, notices and disputes — and a repayment schedule that adds up to the paisa.

The checks apply Indian law: loans and repayments of Rs. 20,000 or more may not be made in cash under the Income-tax Act, 2025 (ss.185 and 188); extra default interest can be cut down as a penalty (Contract Act s.74); money-lenders need a State licence; and the 3-year time limit to sue for money lent (Limitation Act Arts. 19 and 21) is worked out for you. For a flat rate it also shows what the loan really costs on a reducing balance.

Common uses

• Lending to a friend or relative and putting the amount, interest and repayment dates in writing.
• A director or partner lending to their own company or firm, with a schedule for the accounts.
• A business giving a supplier or employee an advance repayable in instalments.
• Comparing a flat-rate offer with a reducing-balance one before agreeing.

How the interest is worked out

• Reducing balance (EMI): each month’s interest is charged on the principal still outstanding: EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where r is the annual rate ÷ 12 ÷ 100 and n the number of months. Every row of the schedule shows the interest, the principal repaid and the balance.
• Simple (flat) interest on instalments: interest = P × rate × months ÷ 12, spread equally over the instalments. The tool also solves the internal rate of return of the instalments to show the equivalent reducing-balance rate.
• Lump sum or on demand: simple interest for the actual number of days on a 365-day year.

Instalments are rounded to whole rupees (you can switch to paise); the last instalment adjusts so the schedule repays the loan exactly. Due dates fall on the same day each month — on the last day of a shorter month when that day does not exist.

No cash loans of Rs. 20,000 or more

Under the Income-tax Act, 2025, no person may take or accept a loan or deposit of Rs. 20,000 or more — counting earlier unpaid loans from the same person — except by account payee cheque, account payee bank draft, ECS through a bank account or another prescribed electronic mode (s.185); the penalty is equal to the amount taken (s.450). Repaying such a loan otherwise than through those modes attracts a penalty equal to the amount repaid (ss.188, 453). Loans from banks, the Government and certain notified institutions are outside the rule. The agreement therefore records the payment reference and requires repayment through the bank.

Interest limits, penalties and money-lending laws

• Excessive interest: if the interest is excessive and the transaction substantially unfair, a court can reopen it, take accounts and relieve the borrower of the excess (Usurious Loans Act 1918, s.3).
• Default interest: a stipulation for increased interest from the date of default may be a penalty, and a court then awards only reasonable compensation (Contract Act 1872, s.74, Explanation and Illustration (d)). Making the whole loan payable when an instalment is missed is not a penalty (Illustration (f)), so the agreement includes it.
• Money-lenders: people in the business of lending need a licence under their State’s money-lending law, which can fix maximum interest rates. In Maharashtra, for example, a court cannot pass a decree for an unlicensed money-lender, compound interest is barred, and total interest cannot exceed the principal (Maharashtra Money-Lending (Regulation) Act 2014, ss.4, 13, 31).

Security and guarantees

A pledge is the delivery of goods — jewellery, for example — as security for a debt (Contract Act s.172); if the borrower defaults, the lender may sue and keep the goods, or sell them after giving reasonable notice, paying any surplus to the borrower, with any shortfall still due (s.176). A guarantor promises to pay if the borrower does not (s.126) and is liable to the same extent as the borrower unless the agreement says otherwise (s.128). A mortgage of land or a building for Rs. 100 or more must be made by a registered deed attested by two witnesses, unless it is a mortgage by deposit of title deeds (Transfer of Property Act 1882, s.59) — this tool only refers to such a deed.

Time limit to recover the loan

A suit for money lent must be filed within three years from when the loan is made, and the same for a loan payable on demand (Limitation Act 1963, Schedule Arts. 19 and 21); the first day is not counted (s.12). Where repayment dates are fixed, the time may run from each due date or the default instead (compare Arts. 28, 36 and 37 for bonds and promissory notes), but the checks show the safest date. A written acknowledgment of the debt signed by the borrower before the period ends (s.18), or a payment on account acknowledged in writing (s.19), starts a fresh three years.

Stamp duty and signing

Stamp duty on a loan agreement is set by each State’s stamp law — it may be charged as an agreement or, because it is attested by witnesses and not payable to order, as a bond (s.2(5)(b)); with a pledge it is also an agreement relating to a pawn or pledge (Schedule I, Article 6), and an instrument that falls under two descriptions pays the higher duty (s.6) — so check your State’s rate and stamp the agreement on or before signing (Indian Stamp Act 1899 and State Acts). The Contract Act does not require a loan agreement to be registered or notarised. Loan agreements may be signed electronically, but a promissory note generally cannot be (Information Technology Act 2000, First Schedule) — use the promissory note generator for a paper note.

Sources

• Income-tax Act, 2025 — ss.185, 188, 450, 453 (no amendment by the Finance Act, 2026)
• Indian Contract Act 1872 — ss.74, 126, 128, 172, 176
• Limitation Act 1963 — ss.12, 18, 19; Schedule Arts. 19, 21, 28, 36, 37
• Usurious Loans Act 1918 — s.3
• Maharashtra Money-Lending (Regulation) Act 2014 — ss.2, 4, 13, 31
• Transfer of Property Act 1882 — s.59
• Companies Act 2013 — ss.2(31), 73
• Indian Stamp Act 1899 — ss.2(5), 6, 35; Schedule I Arts. 5, 6, 15

Limitations

• A generic template, not legal advice. Loans by banks, NBFCs and licensed money-lenders, loans secured by a mortgage, and loans across borders need a lawyer and their own regulatory documents.
• Tax: interest income is taxable for the lender and tax may have to be deducted at source in some cases; check with a tax adviser.
• A company that borrows must check the Companies Act, 2013: any money it receives by way of loan is a “deposit” unless the deposit rules exclude that kind of receipt (s.2(31)). The checks remind you, but the exclusions are not checked.
• Stamp duty is not calculated and money-lending interest caps are not checked State by State.
• Prepayments, missed instalments and changes in rate are not recalculated after signing — the schedule shows the agreed plan.
• The first DOCX or PDF download needs a connection to load the document engine; Copy and Print work offline.

Privacy

Everything happens in your browser. Names, addresses, account details and amounts are not uploaded or stored by MySmartCoPilot. If you tick Keep a draft in this browser, the form is saved in this browser’s local storage until you untick it — leave it off on a shared computer.