Promissory Note
Borrowers or Lenders Can Download A Promissory Note Template For Future Payments
What is a Promissory Note?
A promissory note is a contract where the borrower agrees to pay back the lender at a future date. The difference between a loan agreement is that a promissory note only has power over the borrower. The one-sided nature of a promissory note means it is used in less formal agreements between family, friends or business partners. Â
Features of Promissory Notes:
Payment Terms
Lump-Sum Repayed on or by a certain date
Installments are paid at a set interval
Interest is paid at an agreed-upon rate and duration
What Kinds of Loans Are Good For Promissory Notes?
As mentioned these are less formal than normal loans. Promissory notes are perfect to use in:
- Corporate loans
- Purchasing big-ticket items like boats or cars
- Mortgages, down payments, closing costs, repairs
- Student loans, many kids rely on their parents to get favourable loans for university
- Personal loans – when lending to friends or family always records the terms in a promissory note
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Promissory Note FAQ
What's the difference between a promissory note and a loan agreement?
In a loan agreement, both parties are subject to terms and both parties sign the document. A promissory note is only legally binding for the person borrowing the money.Â
What to do if the money isn't returned?
If the money is not returned under the terms of the promissory note the lender can take to the borrower to court and win. Before it gets to that point it is best to try and request the money or settle the debt before hiring lawyers.Â
What is a promissory note?
This is a legal document showing evidence that a loan will be repeated under the terms agreed to in the promise to pay document.Â
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