Begin by adding the relevant information for each party, such as name, address, and contact information. Note that the borrower is the party receiving the loan from the lender and making the promise to repay on the promissory note.
Next, you will fill out the details of the transaction. It is important to be as detailed as possible in identifying what exactly the borrower is receiving from the lender, such as money, goods, or services. Then provide the details of repayment, including how long the borrower has to repay and the payment frequency. Note that you will be able to include your own custom terms when completing our questionnaire, should you wish to.
After that, you will indicate whether the lender requires any collateral to secure repayment. For example, with a mortgage agreement, the house is the collateral provided for the loan. In the event of a default by the borrower, the lender will be entitled to keep or sell the collateral.
After completing your promissory note, be sure to review it thoroughly to ensure that it meets your needs. You may make textual edits by downloading the document in .doc format and opening it in Microsoft Word or Google Docs. If no edits are needed, download it in .pdf format and print it for signing. Though not required in many states, we recommend using a notary to witness the signing of the document. This will help prove the authenticity of your promissory note in the event of a dispute. It is also a good idea to include a regular witness for the same reasons. After it is signed, distribute copies to each party for safekeeping.
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 as 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.
When completing your promissory note you must answer some basic questions, including the party names and addresses, details and requirements of the transaction, and terms of repayment.
You will use the information collected to answer our easy-to-follow questionnaire. We guide you through each step to help you tailor your promissory note to your needs. By analyzing your answers, we dynamically customize the questions that follow to suit your circumstances and legal jurisdiction.
Be sure to thoroughly read your promissory note to ensure that it is free of errors and meets your specific needs. You can make your own textual edits to the document after downloading it in .doc format and opening it in Microsoft Word or Google Docs. If you are satisfied with your promissory note, simply download it in .pdf format before printing.
While most states do not require you to use a notary, we recommend that you do. This will help prove the validity of the document should there ever be a dispute. Be sure to wait to sign the document until you are in the presence of the notary. Also review any additional instructions we provide with your printed document prior to signing.
Provide each party with a copy of the fully executed promissory note. You may also wish to give copies to other interested parties. Store your copy in a safe location. It is also a good idea to create a digital backup.
Periodically review your promissory note to ensure that you stay familiar with the responsibilities of each party. You can always amend the promissory note in the future by using our contract amendment form.
You can often benefit from additional legal protections by completing documents such as a loan agreement and sales contract. For instance, a loan agreement offers the parties additional options for repayment and securing the transaction. Also, a sales contract may apply to your situation when goods or services are being exchanged and allows the parties to agree on details concerning shipment, delivery, warranties, and other important terms.