A promissory note is a written promise by one party to pay another party (lender and borrower) a sum of money either on demand or at a later date. This legal document declares that the borrower will repay the lender a specific amount of money in an agreed set timeframe, which often include interest. Promissory notes are most useful when you are loaning someone a large sum of money and you want a legal proof of the loan. Borrowers will typically sign the promissory note in order to receive their borrowed funds and state as evidence that they will pay it back. Promissory notes are often included in a student loan, car loan, business loan, and/or personal loan agreement. They also are secured by a real estate mortgage as a security interest in personal property. The most important elements of the promissory note are the financial details as well as the dates that are agreed upon by the lender and borrower, which include the amount borrowed, any interest and how it will accrue, when the payments are to be made, and the amount of the payments.
While drafting a promissory note is relatively simple for an attorney, there are many different types of promissory notes with a variety of required elements and repayment options, so it is highly advised to consult with an attorney to decide on the right promissory note for you. At Smythe & Jones, we can assist you in drafting the best promissory note for your circumstances. The minimal expense now can save a great deal of expense with conflict later.