You will start by entering in the relevant party information. The borrower is the party promising to pay back the lender in the promissory note.
Next you will fill out the transaction details. Be as specific as possible in describing what the borrower is receiving from the lender, whether it is a mortgage loan, goods, services, etc. You will then describe how the lender expects to be repaid. You will also have the option to include miscellaneous terms and conditions later in the form builder should you need to further customize your agreement.
Then you will describe whether the lender is requiring any collateral to ensure repayment. In a mortgage agreement, for example, the collateral is the house itself. If the borrower defaults on repayment, then the lender gets to keep or sell the collateral.
Lastly, you will be asked about including a notary and witness. It is always recommended to include a notary to help prove the validity of the document should you ever need to. For the same reason, including a witness is helpful. If possible, it is a good idea to include both.
After you are done filling out the form, simply have the borrower, lender, and any notary and witness available sign the document in each other's presence. Again, although a notary and witness are not required in most jurisdictions, it is always a good idea to include them. When the document has been signed and witnessed you are done! Make sure the borrower and lender each get a copy.
Both promissory notes and loan agreements fulfill the same purpose; they both evidence a debt owed between a borrower and a lender. However, in practice, a promissory note is generally not as detailed as a loan agreement. A loan agreement includes additional details regarding the promises and obligations of the parties as well the ability to include a guarantor as co-signer. Both agreements allow you to specify property as collateral for the loan.
A promissory note is a legal instrument similar in nature to any contract. To make a contract enforceable, it must contain certain legal conditions which are an offer; an acceptance of that offer; and consideration, also known as value. Contracts indicate the type and amount of payment for services or goods rendered. In the case of a legal promissory note, the contract will be shaped around the amount of money or capital loaned and the terms of repayment of the promissory note.
As with any contract, a promissory note contains terms and conditions associated with an agreement that has been established between two parties. It details the total amount of money or capital loaned, the interest rate charged, and the timeline for repayment. When all of these conditions are addressed in the details of the promissory note and it is executed correctly, the promissory note meets all the elements of a legally binding contract.
An "on demand" loan means that repayment is not set to a fixed schedule of payments. Repayment will be due when the lender gives the borrower notice that the loan needs to be paid back. In most cases, a promissory note will stipulate a mandatory notice period that the lender must give to the borrower before the loan is repayable. For example, if a promissory note stipulates a 90-day notice period, then when the lender gives notice to the borrower, the borrower will have 90 days to gather and deliver the funds.
Simple interest is interest that is only calculated on the unpaid principal amount of the loan. Compound interest is interest that is calculated both on the unpaid principal amount and the unpaid interest.
As you complete your promissory note, you will need to provide certain relevant information. This includes the names and addresses of all borrowers and lenders, transaction details, and repayment terms.
Use the information you collected to complete the promissory note. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected.
It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads are available by navigating to the Documents section of your account dashboard.
Although a notary and witness are not required in most jurisdictions, it is always a good idea to include them. When signing the document, be sure to follow any additional instructions related to signing and witnessing the document. Any such instructions will either be located next to the signature line or in the instructions attached at the end of the document.
When using a notary or other witness, you must wait to sign the document until they are present.
At a minimum, all parties that sign the document should receive a copy once it is fully executed (everyone has signed). Other interested parties may need or want copies as well. Be sure to store your copy in a safe location. It is a good idea to keep both a physical and electronic copy.
It is easy to forget the ins and outs of your promissory note. Periodically reviewing it will help you stay familiar with any responsibilities or requirements so that you can determine when it needs changes or additions.
Completing documents such as a loan agreement and sales contract may help offer additional protection. For example, a loan agreement provides additional details and protections regarding repayment. A sales contract, if applicable, will help solidify terms regarding delivery, shipment instructions, warranties, and important deadlines.