An IOU letter or an “I Owe You” letter is a formal agreement between two parties that sets out the terms and conditions of a debt owed. The document serves to record the exchange of goods, services, or money owed, as well as the repayment schedule and any other relevant information. It also ensures that both parties acknowledge the terms and conditions and agree to them. The IOU letter should be written in a clear, concise language that leaves no room for misinterpretation or confusion. By having an IOU letter on hand, both parties are protected should there ever be a dispute over the amount or payment.