What's the Promissory Note?
A Promissory Note is a legal form that documents a loan between two parties. It enforces a borrower's promise to pay back a sum of money to a lender within a specific time period.
When to use Promissory Note?
Usually, we use promissory note to: ·Private or personal loans between family members, friends or colleagues ·Student or educational loans ·Real estate loans, mortgages, or property down payments ·Bank loans ·Commercial or business loans ·Car or vehicle loans
What are included in a Promissory Note?
A formal promissory note should include these parts: ·Parties: identify the lender and borrower. The lender may be a corporation or individual. ·Payment Plan: choose a schedule for when the loan needs to be repaid, including how the borrower will make his or her payments and how often. Payments can be made weekly, monthly, or yearly. ·Amount: while the loan amount may be straightforward, you will need to decide whether to charge interest and if it will be compounded monthly or yearly. ·Collateral: as part of your Promissory Note, there may be an option to include collateral or security. Collateral is protection for the lender against a borrower's default. If the borrower defaults, the lender can become the owner of the collateral or sell it to pay the outstanding amount. Collateral may be a vehicle, jewelry, or other assets worth the equivalent or more than the loan itself. ·Amendments: amendments to the Loan Agreement can only be made if both the lender and borrower agree to change the terms. ·Signatures: once complete, the loan contract should be signed by both the lender and borrower to bind the terms. ·Collection: after the terms are signed, the borrower is expected to make payments regularly according to the agreement. If the borrower defaults on a payment, the lender may demand the whole amount immediately as well as charge a higher interest rate until the lender is paid.
There are detailed parts in our promissory note Download to ensure the legality and standardization of the agreement. Download this promissory note and use PDF Reader Pro - a professional PDF editor - to edit your promissory note.