Free loan agreement template
A free loan agreement template for Kenya, for a private loan between individuals or small businesses. It records the amount, the repayment dates, any interest and any security. An action to recover the money must be brought within six years under section 4(1)(a) of the Limitation of Actions Act — though under section 23(3) each payment the borrower makes, and each written acknowledgement they sign, starts that period again.
What you still need to do
- Diarise the six years. Section 4(1)(a) of the Limitation of Actions Act bars an action founded on contract after six years from when the cause of action accrued.
- Keep every receipt and every written acknowledgement. Under section 23(3) each payment and each acknowledgement restarts that period from its own date — the receipts are the proof.
- If there is a guarantor, make sure the guarantee is in writing and signed by them. Law of Contract Act section 3(1) means an unsigned guarantee cannot be sued upon.
- Write the interest rate down and say how it is calculated and over what period. "With interest" on its own is an argument, not a term.
- If the security is land, stop and take advice. A disposition of an interest in land needs writing, all parties’ signatures and an attesting witness under section 3(3), and a charge has registration requirements this document does not meet.
- This is a private loan. Lending as a business is licensed and supervised under separate statutes, and this template is not a licence to operate as a lender.
Why each clause is here
Every clause in this document is drawn from the provision named beside it, and the wording of each provision was read in the Act itself. Where the law fixes something a document cannot change, this is where it says so.
Identity numbers are here so that the person who signs can be matched to the person sued, and so that payments can be traced to the right party. No Act we hold prescribes the wording of this clause.
Recording the date and method of the advance matters more than it looks: a dispute about a private loan is very often a dispute about whether the money was handed over at all. A written acknowledgement of receipt settles it, and is also an acknowledgement for the purposes of sections 23 and 24 of the Limitation of Actions Act.
Clause 5 is not housekeeping. Section 23(3) of the Limitation of Actions Act provides that where a right of action has accrued to recover a debt and the person liable acknowledges the claim or makes any payment in respect of it, the right accrues on and not before the date of that acknowledgement or the last payment. 🔴 So the receipts are what prove when the recovery period last restarted. Note the proviso: a payment of part of the interest then due does not extend the period for claiming the rest then due, but a payment of interest is treated as a payment in respect of the principal debt.
🔴 Write the rate down and say how it is calculated. A loan that says "with interest" and no more is an argument waiting to happen, and a rate expressed per month reads very differently from the same figure per annum. Lending money AS A BUSINESS is regulated separately — banks, microfinance and digital credit providers are licensed and supervised under their own statutes — and this template is for a private loan, not a lending operation. No Act we hold prescribes the wording of this clause.
🔴 If the security is land, this clause is not enough and this is not the right document. A contract for the disposition of an interest in land must, under Law of Contract Act section 3(3), be in writing, signed by all the parties, and each signature attested by a witness present when that party signed — and a charge over land has its own registration requirements besides. Take advice before lending against land.
Section 3(1) of the Law of Contract Act: no suit shall be brought to charge a defendant upon any special promise to answer for the debt, default or miscarriages of ANOTHER person unless the agreement, or a memorandum or note of it, is in writing and signed by the party to be charged or by someone lawfully authorised by them. 🔴 A guarantee given by a handshake cannot be sued on. If there is a guarantor, they must sign.
Section 4(1)(a) of the Limitation of Actions Act bars an action founded on contract after six years from the date the cause of action accrued — for a loan repayable on a fixed date, that is ordinarily the date of default. Section 24(1) requires any acknowledgement that restarts the period to be in writing and signed by the person making it, which is why a lender whose borrower has gone quiet should ask for a signed acknowledgement rather than a verbal promise. A witness is not required by either Act, but a signature that is later denied is a problem a witness solves cheaply.
The provisions, in the Act’s own words
Spacing is normalised for reading. Every word is the Act’s.
Where a right of action has accrued to recover a debt or other liquidated pecuniary claim … and the person liable or accountable therefor acknowledges the claim or makes any payment in respect of it, the right accrues on and not before the date of the acknowledgement or the last payment: Provided that a payment of a part of the rent or interest due at any time does not extend the period for claiming the remainder then due, but a payment of interest is treated as a payment in respect of the principal debt.
(1) Every acknowledgement of the kind mentioned in section 23 of this Act must be in writing and signed by the person making it. (2) The acknowledgement or payment mentioned in section 23 of this Act is one made to the person, or to an agent of the person, whose title or claim is being acknowledged, or in respect of whose claim the payment is being made
No suit shall be brought upon a contract for the disposition of an interest in land unless— (a) the contract upon which the suit is founded— (i) is in writing; (ii) is signed by all the parties thereto; and (b) the signature of each party signing has been attested by a witness who is present when the contract was signed by such party
No suit shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person unless the agreement upon which such suit is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized.
The following actions may not be brought after the end of six years from the date on which the cause of action accrued— (a) actions founded on contract