Acknowledgment of debt as guarantee in the context of a private loan

acknowledgment of debt

When you lend money to someone or borrow from a friend or family member, in particular, you must clearly define and have the conditions of this loan recognized by both parties. This is where comes in acknowledgment of debt, an essential legal tool in Switzerland to guarantee a private loan. In this article, we will explore in detail what an IOU is, its importance, and how to draft it appropriately.


  1. What is an acknowledgement of debt?
  2. How does IOU work?
  3. The advantages of recognition of debt
  4. Case studies and examples
  5. How to write an IOU?
  6. Download the Lica model
  7. Our conclusion on recognition of debt

What is an acknowledgement of debt?

In an acknowledgment of debt, the debtor undertakes in writing to repay a sum of money to the creditor. Although it may seem simple at first glance, nevertheless, it plays a crucial role in protecting the interests of both parties in the event of disagreement or oversight.

Why is it so essential in the context a private loan ? Imagine that you lend a large sum to a friend. Without loan agreement, if your friend denies or forgets this agreement, it may be difficult for you to prove the existence of the loan or get your money back. The acknowledgment of debt acts as formal proof of the debtor's obligation towards the creditor.

How does this type of contract work in Switzerland?

acknowledgment of debt

In Switzerland, a private loan contract does not require specific formalities such as drafting by a notary to be valid. However, it must contain certain elements to be legally binding (CO articles 312 to 318).

Essential elements of a valid valid contract:
  • Identification of the parties: The full name, address and other relevant details of the lender and borrower.
  • Amount of the loan : The exact amount lent must be clearly indicated.
  • Interest rate : Yes un interest is agreed, it must be clarified.
  • Repayment Terms : How and when the money will be repaid (e.g. in a lump sum, monthly installments, etc.)
  • Date and place of signature: For traceability and validity of the document.

Once these different elements have been agreed, it will be enough to modify them in the loan contract model. You can download it at the bottom of this article.

The advantages of recognition of debt

An acknowledgment of debt, although seemingly simple, offers a multitude of advantages for both the creditor and the debtor:

  • Legal protection: For the creditor, in the event of non-repayment, it constitutes formal proof of the money owed, thus facilitating legal procedures to recover the amount loaned. For the debtor, it serves as proof that he has respected his commitments once the loan has been repaid.
  • Clarity of terms: It helps avoid misunderstandings by specifying loan details, such as the amount, the interest rate, and the repayment terms.
  • Confidence building: By formalizing the agreement, both parties show their commitment and seriousness, thus strengthening mutual trust.
  • Flexibility: The parties may adapt a loan contract to their specific needs, for example adding specific clauses if necessary.

As you will have understood, if you opt for a private loan, setting up an acknowledgment of debt is essential to ensure the interests of both parties.

Case studies and examples

Case 1: Disagreement between friends

acknowledgment of debt

Marc lent Sophie 10,000 CHF to help her start her business. They did not consider it necessary to draw up an IOU, relying on their long-standing friendship. Unfortunately, two years later, Sophie was unable to repay Marc. Without a contract, Marc found himself without any way to prove the loan.

Case 2: Early repayment

Julien borrowed 5,000 CHF from Camille and they signed an acknowledgment of debt with a specific deadline. A few months later, however, Julien got an unexpected bonus and decided to repay Camille before the deadline. Thanks to the loan agreement, he was able to prove that he had fulfilled his obligations.

acknowledgment of debt

How to write your loan contract?

Writing an acknowledgment of debt is simple. However, you must make sure to include all the essential elements for it to be legally valid.

  • Clearly define the parts: Make sure that the full names and addresses of both parties are mentioned.
  • Specify the amount: Clearly indicate the amount loaned, in figures and words to avoid any ambiguity.
  • Indicate the interest rate: Yes an interest rate is agreed, mention it. Otherwise, specify that the loan is interest-free.
  • Detail the reimbursement terms: Indicate whether the amount will be reimbursed in one go or in several installments. Also specify the dates or frequency of payments.
  • Signature of the parties: All parties must sign the document, preferably in the presence of witnesses to add an extra layer of validity.

If you are not sure how to word your loan contract, we strongly recommend that you use a pre-established template, like the one that Lica offers. This ensures the inclusion and correct wording of all essential elements.

Download the Lica model:

Our conclusion:

IOU is a powerful tool for guarantee a private loan in Swiss. It offers protection and clarity to both parties and can avoid future disputes or disagreements. If you are considering borrowing or lending money, always be sure to put the terms of the agreement in writing using an IOU. To facilitate this process, download the debt acknowledgment template now. Lica.

Do you have questions about establishing an acknowledgment of debt? Our advisors are there to answer your questions 7 days a week directly on WhatsApp. Ask us for more information and we will be happy to answer you!

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