IOU

AAA

DEFINITION of 'IOU'

An informal document that acknowledges a debt owed. IOU is an abbreviation, in phonetic terms, of "I owe you." The debt owed does not necessarily involve a monetary value but can also involve other products. With IOUs being informal, those issuing the IOU are given free reign when writing and issuing an IOU. Things like time, date, interest, and payment type are not mandatory but may be implied.

INVESTOPEDIA EXPLAINS 'IOU'

The informal nature of an IOU means that there may be some uncertainty about whether it is a binding contract, and the legal remedies available to the lender, as opposed to formal contracts like a promissory note or bond indenture. Because of this uncertainty, an IOU is generally not a negotiable instrument.

RELATED TERMS
  1. Promissory Note

    A financial instrument that contains a written promise by one ...
  2. Mortgage-Backed Note

    A type of promissory note that is associated with a particular ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  6. Bond

    A debt investment in which an investor loans money to an entity ...
Related Articles
  1. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  2. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

  3. The History Of Money: From Barter To ...
    Forex Education

    The History Of Money: From Barter To ...

  4. Advanced Bond Concepts
    Bonds & Fixed Income

    Advanced Bond Concepts

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center