Question 1

Is it really a loan if it's family?

Accepted Answer

Yes — if that's what you both intend, and you write it down. The difficulty with family lending is that nobody can later point to what was agreed, so a loan quietly turns into an argument about whether it was a gift.

A Friends & Family Loan Agreement states plainly that the money is a loan repayable in full, not a gift and not an early slice of an inheritance. That one sentence is the most valuable thing in the document.

Question 2

Do I have to charge interest?

Accepted Answer

No. Most family loans are interest-free, and that's a perfectly normal choice.

Enter 0% and the agreement says the loan is interest-free, that the parties agreed this deliberately, and that charging no interest doesn't make it a gift or reduce what's owed. If you'd rather charge interest, enter a rate and the repayment maths is calculated for you.

Question 3

What if we haven't agreed a repayment schedule?

Accepted Answer

That's common, and the agreement handles it. You can choose monthly instalments, a single lump sum by a date, repayable on demand with notice, repayment when something specific happens (the house is sold, a mortgage is refinanced, study finishes), or a flexible arrangement with no fixed schedule.

If you pick flexible, the document records that the borrower repays when they're reasonably able — and that having no schedule doesn't reduce the amount owing.

Question 4

What happens if they can't pay one month?

Accepted Answer

The agreement is deliberately gentle about this. If a payment is missed, the lender puts it in writing, the borrower gets a grace period you choose to put it right or agree something different, and by default no late fee and no extra interest is charged.

You can add default interest if you'd prefer, and you can choose whether a serious disagreement goes to a conversation, to mediation, or on to legal action.

Question 5

What happens to the loan if I die before it's repaid?

Accepted Answer

You decide, and the agreement says so: the balance is forgiven and treated as a gift, or it stays a debt payable to your estate, or it's deducted from that person's share of your estate so your other children aren't short-changed.

Whichever you choose, say the same thing in your will. If your will says something different, the will wins — so the two should match.

Question 6

Does my child's partner get a share of the money?

Accepted Answer

This is the main legal reason New Zealand families put these loans in writing. Money gifted to a couple, or gifted to one of them and then mixed into a shared home, can become relationship property. Money properly recorded as a loan is a debt instead.

The agreement includes an optional relationship property clause stating the loan is made to the borrower alone, that it's a debt and not a gift, and that their spouse or partner acquires no interest in it. Depending on your situation a contracting out agreement under the Property (Relationships) Act 1976 may also be worth legal advice.

Question 7

Will the bank want to see this?

Accepted Answer

Often, yes. If the borrower is applying for a mortgage, the bank will want to know whether family money is a gift or a loan, because a loan is a commitment that affects what they can service.

A signed agreement is exactly the document they're asking for. If the money is genuinely a gift with no repayment expected, use a Gift Agreement instead.

Question 8

Can the loan be secured?

Accepted Answer

It can. By default the loan is unsecured, which is what most families choose. You can also secure it against a property — the agreement lets the lender lodge a caveat against the title to record their interest — or add a guarantor who backs the borrower's obligations.

A guarantor signs the printed agreement by hand and should take their own legal advice first.

Friends & Family Loan Agreement

What the agreement covers

A loan, not a gift

Repayment that fits

Interest, or none

If a payment is missed

If the lender dies

Relationship property

How it works

Create a workspace

The Agreement

Get professional legal advice

Frequently asked questions

Keep the money clear, and the relationship too