What is a promissory note?
A promissory note is a legal document, which is also known as a loan agreement, note payable, IOU (I Owe You) or personal note. Form of promissory note is associated with financial information. it is used to describe a loan made from a lender to a borrower. It confirms the borrower’s promise to pay back the sum of money, or principal, to the lender, mentioned document establishes a repayment plan for the amount borrowed. Repayment conditions may be detailed in the promissory note or it may be left open-ended.
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When should one use a promissory note?
One can use a form of promissory note if one borrowed money for: 1) For college or post-secondary education, 2) For a large purchase, such as a car, furniture, or electronic equipment, 3) To start a small business, 4) For personal expenses, such as a vacation or wedding.
Should one use a form of promissory note or a loan agreement?
Though both contracts are used for loans, there are small differences between them: 1) For loans of smaller amounts, it is better to use a form for promissory note. 2) A form of promissory note has simpler repayment terms than a loan agreement. 3) A form of promissory note typically only includes the borrower’s signature, while a loan agreement includes the signature of both the borrower and the lender.
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What Information should one include in a form of promissory note?
A form for promissory note should involve the following details: 1) Loan amount and interest amount, which is a lending fee calculated as a percentage of the principal, e.g. 5% interest on a $1000 loan is $50, 2) the lender and borrower information, 3) term, or length, of the contract, 4) payment schedule (single payment or regular payments), 5) options for penalties on late payments and for collateral.
What payment options are available with a form for promissory note?
Repayment of a loan is possible in a few different ways, involving: 1) Single payment on a specific date: a one-time payment made at the end of the term, 2) single payment upon notice: a one-time payment due by a certain date when receiving notice from the lender, also known as a demand loan, 3) regular payments: payments of a specific amount made at regular intervals.
Below you can download free, fillable template of a standard promissory note: