A simple promissory note is a loan document that shows an agreement between two parties and bounding the lender and the borrower legally. A simple promissory note is based on a number of details of the loan such as the amount of the loan, the names of both the parties, contact information of the parties, applied interest rate and a specific date or due date on which the borrower has to pay back the loan amount to the lender. The purpose of adding a list of information in a simple promissory note is just to ensure that there is no kind of misunderstanding and the promissory note can be used in the court against violated party. Promissory notes can be secured and unsecured. Like other loans, a secured promissory note is the one having any collateral as a security like property or gold before getting money from the lender. On the other hand an unsecured promissory note is a simple promissory note that is free from any kind of collateral and is usually based on small amounts. The parties of the simple promissory note are mostly friends or family members. A simple promissory note is always used for the protection of two parties creating a legal binding to both of the parties.
A Sample Promissory note
__________________ ___________________________ _______________
City State Date
(Borrower) agrees and promises to pay to (Lender) the sum of ($ ) Dollars for value received, with interest at the annual rate of 12 etc % payable after (Date) .
If this note is in default and is placed for collection, (Borrower) shall pay all reasonable costs of collection and attorneys’ fees.
____________________________ Permanent address _________________________________
(Borrower’s signature) (Date)
____________________________ Permanent address_________________________________
(Lender’s signature) (Date)
(Signature of the Witness)
Guidelines to write a simple promissory note
Simple promissory notes have a key importance in our daily life and therefore everyone should have an understanding of writing such promissory notes in order to minimize the risk of getting frauds. Usually, promissory notes are written by attorney or bank however in some cases individuals can also write a promissory note. The following steps will help you in writing a promissory note.
- On the top of the sheet, provide information like city and state and date showing that where and when the promissory note was made. All these three things have separate places making it clearer and reducing the chances of misunderstanding.
- Include the names of both the parties with their addresses, that is usually written in a way that “I (the borrower residing at) agrees to pay a sum of (the loan amount in dollars) to the lender residing at on the date with an annual interest rate of percent (interest amount).
- Clearly state the terms of the loan and payment if any. It is also important to list the amount of the loan that is paid by the lender along with a date and witness. Usually, promissory notes are created on the same day on which lender pays the amount to the borrower.
- At the end of the promissory note, sign the note by lender, Brower and the witness with their permanent address and date.