Promissory Note Information
What is a promissory note?
A Promissory Note is a promise by one party, the Borrower, to pay back a specific sum of money back to another, the Lender. It is a document that typically spells out the details of the loan, including the terms of repayment, interest charged, if any, late fees and what happens if the loan is not repaid.
Promissory notes are more formal than a simple IOU and create a legal obligation to repay a loan.
What is the different between a Secured Promissory Note and an Unsecured one?
Some promissory notes are secured by collateral, meaning that if the Borrower does not repay the loan within the given timeframe, then the Lender may take the collateral, which is typically an asset or a property. Other promissory notes are unsecured, meaning that an asset or property does not back the note. Therefore, the Lender has no way to ensure that it will receive its money back if the borrower should default.
When should I use a Promissory Note?
Promissory Notes can be used for a variety of loans, including: lending money to family and friends, small business loans, car loans, boat purchases and student loans, as well as a variety of other purposes. People who have created a Promissory Note have also looked at or created the following documents:
Loan Agreements
Bill of Sale
Demand for Money Owed
Other Names for a Promissory Note:
IOU
Loan Agreement
***Important to Note: One should check for statutes limiting the rate of interest on small loans of their individual state. To see the usury rates in your state click here