A phonetic acronym of the expression “I owe you”. Technically, it represents is a document (usually, an unofficial document) that acknowledges or proves a situation of a debt owed by one party to another, for whatever reason. At times, an IOU is considered to be an informal written agreement rather than a legally binding contractual commitment.

Broadly speaking, an IOU is an informal note serving as a promise to repay a debt as per the terms and conditions applied to the agreement between the parties involved.

An example is a promissory note that represents a written promise that is extended from one party to another, as a means of future payment.

IOUs, as a loan document, lay out the terms and conditions of a loan or other means of debt, in order to ensure that the debt does exist. By virtue of the document, the creditor has a written evidence as to its right to claim back the amount of debt involved.