You also need to decide whether or not to charge interest, and how often it will be compounded (monthly or yearly).
Repayment amount (“principal” and “interest”)Īll promissory notes, no matter how simple, should clearly state the amount of money being borrowed (the “principal” amount) that needs to be paid back. The borrower may also be called a “payer” or “buyer”.Īn example of “the Borrower” and “the Lender” section 2.The lender may also be called a “payee”, “seller”, “issuer”, or “maker”.Only the borrower must sign the promissory note, but it’s good practice to also include the lender’s signature. Full names of parties (“borrower” and “lender”)Ī standard promissory note should name who is receiving money or a line of credit (the “borrower”) and who will be repaid (the “lender”). How to Write a Promissory NoteĪ legal promissory note should contain the following details and clauses: 1. In general, you should use a promissory note for more straightforward loans with basic repayment structures, and a loan agreement for more complex loans.
Bank, commercial, business, or investment loans.Real estate loans, property down payments, or mortgages.Personal loans between family members, friends, and colleagues.There are many types of promissory notes that can be used for several purposes, such as: If you’re borrowing or lending money, you should create a promissory note that addresses payment details, interest rates, collateral, and late fees. The note records information about how much was lent (the principal amount), interest rates, when the payment is due (maturity date), when and where it was issued, and signatures.Ī promissory note is also referred to as a:
(855) 335-9779 Monday-Friday, 9AM - 7PM EDTĪ promissory note is a written and enforceable agreement in which a borrower promises to pay a lender a sum of money on demand, or within a specified period of time.
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