IOU Uses, Purpose, Importance
OU templates are also known as debt acknowledgment forms, I owe you forms, and
registered warrants. It’s the preferred option whenever the parties involved don’t want to
enter formalities regarding the settlement of debts, depending on the place where they live.
Here are some uses and importance of this document.
Sets Expectations
When an IOU document is created, one’s debt to the lender is acknowledged, and it,
therefore, sets expectations that the debt is to be repaid someday by the lender. By setting
expectations whenever money is involved, the lender’s interests are then protected. Setting
expectations also reduces the chance of a strained relationship between friends or family
members, as this is the situation in which IOUs are commonly used.
Serves as a Written Record
Verbal promises of debt repayment can easily be forgotten unless one has a very sharp and
clear memory. With an IOU template created, a written record is made, which prevents any
conflicts that can arise whenever a verbal promise is made and forgotten. In other words,
having a written record and acknowledgment helps avoid any misunderstandings between
the borrower and the lender.
Ensures Authenticity
Transactions can be done verbally and can be a simple “pay it and forget it” process.
However, when debts are going to be involved, an IOU document can be important since
the transaction won’t be easily forgotten when a written document is involved. As it is signed
and provided with distinguishing marks, this acknowledgment document also ensures the
authenticity of the transaction.
Bond Market Use
IOUs can also be used by financial institutions aside from between friends and family. One
such instance is the bond market, in which bonds are technically classified as a form of an
IOU. This transaction is different from a typical IOU situation since here, an individual loans