By Megon VenterMon. 11 Dec. 20233min Read

How to Write a Promissory Note: A Step-by-Step Guide

This blog will show you how to write a promissory note – a document that is crucial for both private lending and federal student loans.
How to Write a Promissory Note: A Step-by-Step Guide

Are you looking to draw up an agreement around personal loans that will be legally binding? Our team has not only included a FREE template for you to download and edit but also a guide as to how you can write your own and make sure it is legally binding.


Theodore Cipolla
B2B SaaS Content Marketer
Theodore is a B2B SaaS Content Marketer with over ten years of experience. He is passionate about helping professionals appreciate the value of tools quickly. 


How to Fill in a Promissory Note

Creating a promissory note is an essential step in formalizing a loan agreement. Our team has compiled a step-by-step guide to using this template and making it a shareable, useful document.

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Step 1: Identify the Parties Involved

Begin by clearly stating the names and mailing addresses of both the borrower and lender involved in the loan agreement.


Step 2: Define the Loan Amounts and Terms

Specify the total amount of money being loaned and detail the loan terms, including whether it's a secured loan, unsecured loan, short-term loan, or another loan type.


Step 3: Outline the Repayment Schedule

Include a detailed repayment schedule, indicating regular payments, payment dates, and any conditions for overdue payments or demand payment in case of defaults.


Step 4: Set the Interest Rates

If applicable, state the interest rate, whether it’s a fixed rate, compound rate, or adjustable rate, and how it will be applied to the unpaid debt.


Step 5: Include Legal Clauses

Incorporate any legal clauses pertinent to the loan contract, such as prepayment penalties, late payment consequences, or actions in case of breaches of loan terms.


Step 6: Specify Collateral (If Secured Loan)

For a secured loan, clearly describe the collateral that will be used to secure the loan, ensuring all parties understand the terms of the security.


Step 7: Add a Maturity Date

Define the time frame or specific future time when the entire loan amount, including any accrued interest, is due to be paid in full.


Step 8: Include a Clause for Default

Detail what constitutes a default on the loan, the time period allowed for rectifying a default, and the legal recourse available to the lender.


Step 9: Signatures

Ensure both parties provide their electronic signature or physical signature, making the promissory note a binding document.


Step 10: Witness or Notarization

If required, have the promissory note signed in the presence of a witness or notarized to solidify it further as a legal document.

For more information, you can also check our guide on filling in a commercial invoice template.

"By using the promissory note PDF template from PDF Reader Pro, I can ensure a clear and legally binding loan agreement."
Theodore Cipolla
B2B SaaS Content Marketer 
Source: LinkedIn


Use a Promissory Note PDF Template

Utilize a Promissory Note PDF Template from PDF Reader Pro to ensure a clear and legally binding loan agreement.

Select a template that fits your loan type, fill in essential details like loan amounts, terms, and repayment schedules, and have both parties sign to formalize the agreement efficiently and accurately.


Promissory Note: Best Practices

Adhering to best practices while drafting a promissory note ensures a legally sound and mutually agreed-upon loan contract, which is essential for personal loans, mortgage loans, and other financial transactions.

  1. Use a Comprehensive Template: Begin with a promissory note template that encompasses all legal aspects of the loan agreement, including repayment terms and allocation of payments.

  2. Detail Loan Specifics: Clearly outline loan details such as amounts, type (secured, unsecured, mortgage), and the repayment time frame, including any balloon or lump-sum payments.

  3. Set Repayment Terms: Include a detailed repayment schedule with regular installment payments, payment dates, and options for handling late payment fees.

  4. Define Interest Terms: State the interest rate clearly, whether it’s a fixed maximum rate or variable, and how it applies to the principal balance.

  5. Describe Collateral: For secured loans, provide a detailed description of the collateral and related security descriptions.

  6. Draft a Binding Document: Ensure the note is legally binding, with both borrower and lender signatures, making it enforceable in events like borrower default.

  7. Maintain Documentation: Keep copies of the note, including any electronic signature verification, for both parties and in public records if related to real estate.

  8. Customize Accordingly: Tailor the note for specific needs, whether it’s for personal loans, student loans, or real estate-related notes.

  9. Ensure Legal Compliance: Check that the promissory note adheres to legal frameworks, especially for bank loans, private loans, or real estate transactions.

  10. Seek Professional Advice: For complex terms or significant loan amounts, consider consulting a licensed attorney or law firm to ensure compliance with usury rate laws and other legal stipulations.


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Naaziyah Ismail
B2B SaaS Content Writer
Source: LinkedIn


Promissory Note: FAQ

Have further questions for our team on how to write your own promissory note? Explore our FAQ section down below in order to get the answers you are looking for.

What Happens if a Promissory Note is Lost?

If a promissory note is lost, it can potentially be reissued. However, the process involves legal steps to ensure the original note is declared null and void to prevent misuse.

Can a Promissory Note be Amended?

Yes, amendments to a promissory note are possible but must be agreed upon by both parties in writing, and the changes should be formally documented and signed.

Is Collateral Always Required for a Promissory Note?

Collateral is not always required; it depends on the agreement between the lender and borrower. Secured loans require collateral, while unsecured loans do not.

Who Can Lend Money Using a Promissory Note?

Any individual, financial institution, private lender, or business can lend money using a promissory note, as long as they abide by lending laws and regulations.

Can Interest Rates Change in a Promissory Note?

Interest rates in a promissory note can be fixed or variable. A variable rate must have clear terms for adjustments, often linked to current market rates.

How is a Demand Promissory Note Different?

A demand promissory note allows the lender to demand repayment at any time, providing more flexibility compared to notes with a fixed repayment schedule.

Are Electronic Signatures Valid on Promissory Notes?

Yes, electronic signatures are generally considered valid on promissory notes, especially with the increasing acceptance of digital legal documents.

What is the Role of Credit Unions in Promissory Notes?

Credit unions, like banks, can issue loans via promissory notes, often offering favorable terms to their members for various types of loans.

This mastery not only simplifies the loan process but also provides security and clarity for all parties involved, making promissory notes reliable in a wide range of financial scenarios.

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