What Is an IOU?
An IOU, or “I owe you” is a written agreement between two parties that acknowledges the debt of one party to another. It is typically used when someone needs to borrow money from another person and promises to pay it back at some point in the future. The document serves as evidence of the loan and can be used for legal purposes if necessary. An IOU usually includes information such as the amount borrowed, date of repayment, interest rate (if applicable), names of both parties involved, signature(s) of both parties involved, etc.
The purpose of an IOU is to provide assurance that a borrower will repay their debt on time and in full. This helps protect lenders from potential losses due to defaulted loans or other financial issues related to lending money without proper documentation. Additionally, having an IOU allows borrowers more flexibility with repayment terms since they are not bound by traditional banking regulations like those associated with credit cards or personal loans. Ultimately, an IOU provides peace-of-mind for both lender and borrower alike while ensuring all debts are paid off according to agreed upon terms.