How to Create an IOU

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IOU is an acronym that literally means “I Owe You.” The IOU is an acknowledgement of a debt. It is often used when an individual borrows a relatively small amount of money from another that must be paid back. By creating an IOU, the lender is able to lay out the terms and conditions of how the money will be repaid. This will ensure that both parties involved know what to expect.

List the name of the individual who is owed the money as well as the name of the individual responsible for paying the money that was borrowed. Document the amount of money that is owed and when the money is to be repaid, such as: “I, John Bob, do acknowledge and confirm that I owe Jane Doe $2,500. I, John Bob, do agree to pay $2,500 in full to Jane Doe on or before month/date/year.”

State the amount of interest that is agreed upon if the full amount owed is not paid by the date specified in the IOU. For example, “I, John Bob, do agree that if the $2,500 is not paid in full by month/date/year that I am responsible for paying 10 percent interest on the balance, for every 30 days that a balance remains.”

Document the penalties that will occur if the IOU agreement is not adhered to. For example: "I agree that if I, John Bob, fail to repay the $2,500 to Jane Doe, as agreed, that appropriate legal action may be taken against me."

Create “Printed Name,” “Signature,” and “Date” lines at the end of the IOU. This will allow the person responsible for paying the IOU to sign and date the document.

Duplicate the “Printed Name,” “Signature” and “Date” lines at the end of the IOU for the lender to sign and date the document.


  • Make a copy of the IOU. Give the copy of the IOU to the other party. Keep the original for yourself.


  • An IOU may not be considered enforceable in court. Before lending large sums of money that you want to get back, consult an attorney or use a legal document, such as a promissory note, that is signed, witnessed and notarized.