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Loan repayment agreement letter

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Our Loan Repayment Agreement Letter template simplifies the process of documenting loan terms, ensuring clarity and legal compliance.

This is an an agreement that should be issued where an employee takes out a loan from their employer.

Reading time
How long to understand and implement this letter?
5 mins
Word count
How many words in this letter?
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What is a Loan repayment agreement letter?

An employee loan repayment agreement letter is a document that outlines the terms and conditions of a loan repayment plan between an employer and an employee. This agreement is typically used when an employer lends money to an employee, usually as an advance on their salary, and wants to ensure that the funds are repaid in a timely manner.

The purpose of the agreement letter is to clarify the expectations and obligations of both parties, and to ensure that the loan is repaid in a fair and transparent manner. It is important to have such an agreement in writing to avoid any misunderstandings or disputes in the future.

Best practice timescale for this to be issued
When should this letter be issued?
As soon as possible after the request is received
Issued by who, to whom
Who should issue this letter, and to whom?
The Employer (you) to the Employee
Applicable legal jurisdictions
In which jurisdictions can this letter be used?
Great Britain & NI (United Kingdom), Worldwide

How can I ensure that this letteris executed effectively?

Step Description Responsibility Timing
1 Discuss Loan Repayment Terms with Employee HR or Finance Before Loan Disbursal
2 Draft Loan Repayment Agreement Letter HR or Finance After Terms Agreement
3 Review and Approve Agreement with Employee HR or Finance Before Loan Disbursement
4 Sign Agreement with Employee Employee Before Loan Disbursement
5 Issue Loan Repayment Agreement Letter to Employee HR or Finance After Agreement Signing

What legislation and best practice guidelines have been taken into account in the development of this template?

United Kingdom
  • The Equality Act 2010: This act prohibits discrimination on the grounds of age, race, gender, sexual orientation, religion, and other protected characteristics. It's important to ensure that the loan repayment agreement does not discriminate against any employee.

  • The National Minimum Wage Act 1998: This act sets out the minimum hourly rate that employers must pay their employees. Any deductions made from an employee's pay for loan repayment should not take their earnings below the minimum wage.

  • The Working Time Regulations 1998: This legislation sets out the maximum hours that employees can work each week, as well as breaks and rest periods. It's important to ensure that any loan repayment agreement does not interfere with employees' rights to rest periods or work excessive hours.

  • The Data Protection Act 2018: This legislation sets out the requirements for handling personal data, including employees' data. Any loan repayment agreement should comply with the requirements of this act.

  • The Pensions Act 2008: This act requires employers to automatically enrol eligible employees into a workplace pension scheme. Any loan repayment agreement should not affect employees' eligibility for auto-enrolment or their pension contributions.

Other territories

Consult your jurisdiction's employment legislation or labor laws to ensure compliance with the template. Review the language for local precision.

Loan repayment agreement [Delete this line]

[Company name]

[Sender address]



[Recipient name]

[Recipient address]


Dear [Recipient first name],


Loan repayment agreement

This letter sets out the terms on which the organisation is prepared to advance you a loan of £[amount] in accordance with your request dated [date] for the purpose of [purchasing a season ticket/meeting welfare expenses/meeting payments as a result of financial hardship]:

The loan will be free of interest and repayable on a [monthly/weekly] basis, commencing on [date] at the rate of £[amount] per [month/week] by way of deduction from your salary.

In the event that you leave the organisations employment for whatever reason before the loan has been repaid in full, you will be required to reimburse the organisation for the outstanding amount of the loan. You agree that any outstanding monies due to the organisation in respect of this loan may be deducted from any sums due to you from the organisation, including (but not limited to) your [final salary/outstanding expenses/outstanding commission/bonus/holiday pay].

If there is still an amount outstanding after making such deductions, or the organisation agrees, on your request, to further time for repayment of the outstanding amount, you agree to make a separate payment to the organisation within [one month] of the termination of your employment. If relevant, the HR department will set out a schedule for repayment of the outstanding amount.

The loan may constitute a taxable benefit, in which case you will be responsible for the payment of all tax due.

Please sign and date the attached copy of this letter in acknowledgment of your agreement to the above terms.


To [name of employer]

I hereby agree to the terms set out in the above copy letter.



Yours [faithfully | sincerely],



[Sender name]

[Sender job title]

[Sender telephone]
[Sender email]

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Loan repayment agreement letter
loan repayment agreement letter