Free Promissory Note Templates, Drafted by Attorneys
Use our promissory note template in Microsoft Word to create your own customized note. A promissory note is usually held by the party that’s owed money; once the debt has been fully paid, the note must be canceled by the payee and returned to the issuer. Ensuring these points will make your note a valid instrument that can be enforced in a court of law. But if still met with uncertainty, seek professional advice to ensure all legal angles have been covered accurately. Several online resources offer templates, but it’s vital to ensure the resource is credible.
Please ensure that the promissory note is written in a clear and concise manner and that all parties involved fully understand and agree to the terms outlined. When it comes to borrowing or lending money, it is always best to have a written agreement in place. A promissory note is a legal document that outlines the terms of a loan, including the repayment schedule and interest rate. If you are considering drafting a promissory note, there are a few things you should keep in mind to ensure that the document is legally binding and enforceable. Though they are both documents used to outline the details of a loan, a loan agreement and a promissory note are different in several respects. The main difference is that a loan agreement is much more detailed and complex.
- When clearly defined, this provision facilitates understanding and avoids disputes.
- Bear in mind, the loss of the original promissory note can lead to complications in enforcement, especially if a dispute arises between the parties involved.
- Secure your finances with an unsecured promissory note (lump-sum payment).
- An unfair term might be if the note includes an interest rate of 25% but your state only allows for a 15% interest rate.
Step 4: Include Default and Late Payment Provisions
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Promissory Notes by Type
If the loan is repayable in installments, specify the amount to be paid in each installment. Others may choose to provide collateral, which the lender would hold until the borrower returns the loan amount. While these strategies may prove beneficial, a promissory note offers a higher overall degree of legal protection. By carefully considering the legal requirements for signing and the best practices for storage, lenders and borrowers can safeguard the enforceability and accessibility how to write a promissory note of promissory notes. There are several ways to structure interest rates and payments for a personal loan.
After all the elements and provisions are in place, date and sign the promissory note. The borrower signs the note, thus promising to pay the lender the agreed sum under the specified terms. A simple promissory note might be for a lump sum repayment on a certain date. For example, let’s say you lend your friend $1,000 and he agrees to repay you by December 1st.
The Consequences of Default in Personal Loan Promissory Notes
A secured promissory note helps to protect your financial interests and officiate lending agreements. A promissory note is legally binding whether the borrower supports it with collateral or simply the promise to repay. If you choose not to move forward with a promissory note, there are other strategies you can use to secure a personal loan.
If the borrower completely defaults on payment, you can enforce it by reminding them of their obligation. If the borrower doesn’t respond or refuses to pay, you can recruit outside help. If neither the original nor a copy is present, you may find other ways to prove the agreement’s existence (such as a text exchange). Be aware that the borrower may not have an obligation to repay if there’s no proof that the loan occurred. Borrowers can access these free yearly reports online through websites like AnnualCreditReport.com or credit card company perks. Susan Chai is Legal Counsel and Legal Editor at LegalTemplates and has been with the company from the ground floor.
The one you choose may depend on the duration of the loan, payment amount, or even on the party to whom you are issuing the loan. Suppose, for example, that you have a friend or family member who needs a personal loan to help during a hard time. You might choose to issue a personal loan at a lower interest rate than the bank.
And the note gives them the power to foreclose if the homeowner defaults. As part of the home loan mortgage process, you can expect to execute both a legally binding mortgage and mortgage promissory note, which have complementary purposes. A home mortgage secures a promissory note with the title to the property as collateral. This is done in case the lender ever needs to foreclose and sell the property because the homeowner didn’t make their loan payments. Unlike a loan agreement, which is binding on both the lender and the borrower, promissory notes are a one-sided document where the borrower agrees to repay the lender.
Creating a promissory note begins with the selection of a suitable template. This ensures the note aligns with the required standards and best practices. The main body of the promissory note should state the principal amount that is being borrowed clearly and concisely. The principal is the amount of money that the borrower receives from the lender before any interest accrual. In addition to the key elements, it is often beneficial to include certain additional provisions to further protect both parties.
