Fillable Form Standard Promissory Note

When lending money, some people fear that their money might not return to them. Part of the reason why this happens is that they do not establish the terms and conditions which the borrower should comply with. Therefore, agreeing on the terms and conditions is an important part of lending money. This gives lenders a sense of security that their money will return to them.

One example of this agreement is filing a promissory note.

What is a Promissory Note?

A promissory note is a document that shows the terms and conditions of a loan agreement between a borrower and a lender. It is given by a borrower to a lender as proof that he or she will return the lender/s money.

You can write your own promissory note when repaying a debt to a family member or friend.

For example, when you loan money from a person or a business, they may require you to fill out a promissory note as proof that you agreed to the terms and conditions of the loan.

How to fill out a Promissory Note?

Before anything else, make sure that you (borrower) and the lender both agree on the terms and conditions. Also, make sure that you gather all the information necessary and finalize the agreed amount of payment so that you don’t miss any important part in the promissory note.

On the top of the form, write the date of the writing of the promissory note (the “start date”). You will also have to write the following important information:

• Borrower’s full name and address

(There can be more than one borrower. List all of their names in the note.)

• Lender’s full name and address

(If there are more than one lenders, you can list them in the note. If the lender is an entity, a representative can sign on the entity’s behalf.)

• Principal sum

(The principal sum refers to the amount of money you need to repay the lender. If you are charged an interest, input the total of your repayment amount with interest.)

Some of the important parts of the promissory note, as well as what to write in these sections, are explained below.

1. Payments

• Indicate here the due date of your payment.
• Describe here what kind of payment you’re planning to make. Indicate here if you’re paying the full amount (lump sum) or if you’re paying in installments.
• If paying in installments, also indicate the frequency of your payment (weekly, monthly, quarterly).
• Late fee: The lender may choose to charge you a late fee if you fail to make the payment on time. Indicate the late fee here.

2. Security

• A secured promissory note means that the loan is secured by an item of value. For example, the collateral may be a house, car, or boat.
• An unsecured loan, on the other hand, is debt not secured by a collateral, and is based solely on the borrowers

The next items (4 to 15) are the terms and conditions of the loan. You do not have to fill out anything in these items. However, be sure to read on these items to be fully informed of the loan terms and conditions.
3. Interest due in the event of default. When the borrower fails to pay in full, the interest amount may accumulate over time, which the borrower should also pay.
4. Allocation of payments. This states the allocation of the payments if there are any excess amounts paid by the borrower.
5. Prepayment. The borrower can pay the debt and interest earlier than the due date.
6. Acceleration. In some instances, the lender can demand immediate payment from the borrower.
7. Attorney’s fees and costs. In the event of any court proceeding that may arise from this agreement, the prevailing party shall be entitled to recover its reasonable attorney’s fees and costs.
8. Waiver of presentments. The borrower is liable to payment of default penalties without being formally informed.
9. Non-waiver. This note shall not waive the lender from failing to exercise lender’s rights.
10. Assignment. The borrower may not assign or delegate his or her duties without the consent of the lender.
11. Amendment. The note may be amended only when agreed upon by both the lender and the borrower.
12. Severability. Any void or unenforceable provision in this note shall not affect the validity of the other provisions in this form.
13. Integration. No other agreements may modify or affect the terms of this note.
14. Conflicting Terms. The terms of this note shall control any conflicting terms in any referenced agreement or document.
15. Notice. Any notices must be made known and given to the borrower.

These next items are to finalize your promissory note and to confirm your agreement to the terms and conditions of the loan.
16. Co-Signer. Indicate here if there is a co-signer in your promissory note. A co-signer is a person who is responsible for paying the principal amount, in case the borrower fails to make the payment in due time.

17. Execution. The borrower, and co-signer if applicable, shall be both liable to the terms and conditions of this note.

18. Governing Law. Indicate here the state where you have filed the promissory note. Each state may have its own laws concerning promissory notes. The laws of the state where the promissory note is filed would apply to the note.

19. Signature. Both the borrower and the lender can provide their signatures on this part of the form, but by default, only the borrower should sign the form. This would finalize the agreement and certify their agreement to the terms and conditions.

You must submit your accomplished promissory note to the lender. Keep a copy for your reference. The lender will keep the promissory note during the loan period. He or she will use this as a reminder of the terms and conditions of the loan, the due dates, and the due payments, as well as the penalties that come with non-compliance with these terms. When the loan period ends and the payment has been fulfilled, the promissory note will be released, and the terms and conditions.

Frequently Asked Questions About a Promissory Note

How legal is a promissory note?

A promissory note is a legal document in which one party — the maker or drawer — promises in writing to pay a determinate sum of money to the other — the payee, either at a fixed or determinable future time or on demand of the payee when he has reason to know all the facts. It also specifies the amount of principal and the rate of interest, if any. It is a legally binding document that is generally used as written confirmation of a loan.

What should a promissory note include?

Promissory notes consist of different parts including the details of the parties involved, the date of the loan, the payment terms, the date of the repayment, and the interest rates. Some parts that may be included are the place of payment, the currency used in the note, and a list of any collateral that has been offered.

A promissory note is a legal document that outlines conditions that could result in the breaking of a contract. Thus, it must clearly state the laws that would it. Promissory note laws vary from one jurisdiction to another, so it is important for a creditor and debtor to seek the advice of a legal professional. Moreover, promissory note laws are typically aimed at ensuring that the debtor either makes their promised payment or, if they are unable or unwilling to do so, gives back any goods or services provided by the creditor. The primary goal of promissory note law is to establish a contract between the creditor and debtor, in which the debtor agrees to repay their debt within a certain period of time.

Who holds promissory notes?

While the load is still outstanding, the lender holds the promissory note. Only when the loan is completely paid off, the promissory note is returned back to the borrower.

Can I write my own promissory note?

Yes, you can write your own promissory note. There are a few things to consider, however.

Lender requirements for promissory notes vary from lender to lender. Some lenders will require you to draft the note yourself while others may allow you to use a fill-in-the-blanks form that they provide for this purpose. In either case, your draft of the promissory note must meet the lender's requirements for this document, which is why it is important to understand these requirements. Lenders generally have certain stipulations in their promissory notes that are required.

Some of the common elements of a promissory note are the lender's and borrower's name; the amount of the loan; details regarding repayment, including repayment schedule and other expectations; interest rate, late payment penalty, or other applicable fees; and signatures.

Can a promissory note be handwritten?

Yes, a promissory note can be handwritten. Whether it is typed or handwritten, it is legally binding between the issuer and the payee when they both sign the promissory note. However, a handwritten note may be more difficult to enforce in court as opposed to a promissory note which is written on a pre-printed form. In the event of unpaid debt, if you have a handwritten promissory note from your debtor, it is possible that you may need to take legal action towards the collection of the debt.

What happens if I don’t pay a promissory note?

Since a promissory note is a legally binding document, not paying it can have significant consequences. The common consequence is losing an asset or property of equal value to the debt. For example, if you borrow $10,000 and do not pay it back, the person or business that loaned you money can take your car and sell it to recover their loss. If there is not enough equity in your vehicle to cover the debt, then they can repossess other assets such as real property, furniture, tools, or equipment.

In some cases, a creditor may have a judgment issued against you if they win a lawsuit over the debt. If this is the case, most creditors will try to garnish your wages in addition to repossessing property if necessary so they can recover more of what you owe them. In fact, most creditors must obtain a judgment before they can attempt to garnish your wages or take any other action.

If you are sued over the promissory note, however, you may not want to just give up and let them win by default. The most important thing to do is seek legal advice promptly so that the attorney can investigate the claim and determine if there are any valid defenses available.

Will a promissory note stand up in court?

A comprehensive promissory note is legally binding on both parties when they sign it. It is governed by the laws of the land where it was executed. Therefore, it may be used in court if it is breached.

A promissory note states the amount of money owed, the rate at which interest must be paid, when repayments are due and how they are calculated, who will service or collect payments on the debt, any late payment fees that creditors may charge, exactly how much is to be repaid in total overtime or the amount of the debt, and any other important terms both parties agree to. When any terms or conditions are broken, this could mean that one or both parties are in breach of contract.

What voids a promissory note?

While a promissory note is a legally binding contract between a borrower and a lender, it may become null and void when the terms and conditions were changed, were not correctly written, and are vague. All this may happen because of simple human errors. When the note is voided, the lender or creditor will become unable to collect on your debt unless they can prove that you signed a new promissory note that conforms with the original terms of the agreement.

Make sure to read the entire note and understand all of its terms. If you are not sure, get a person who understands them to go over it with you. Before executing a promissory note, it is important to make sure that all the necessary information is included. Be wary of blank spaces in the promissory note you are signing. Some will try to trick you into thinking they are not important by filling them with dots or dashes. Ask about each blank space, what it means, and why it is there.

Remember that once you sign a promissory note, you are bound by the terms of that agreement. If you do not comply with those terms, your creditor can try to sue you.

Do promissory notes have to be notarized?

A promissory note becomes legally binding when both parties sign it. It does not need to be notarized. When the parties involved in the agreement execute the promissory note, they are agreeing that the person who owes the debt to the lender has consented to pay back a certain amount of money and it is now their legal obligation to do so. Failure to adhere to the terms and conditions will result in a breach of contract and can lead to legal proceedings being filed by the lender.

While notarizing a promissory note is not a requirement for it to be legally binding, it may be done to verify the authenticity of the borrower or lender.

How long is a promissory note valid?

A promissory note is valid until it is paid. However, in general. A promissory note is valid for three years starting from the date of execution. However, if a promissory note is for more than three years from the date of execution, it is valid only if it is not prohibited by law. A promissory note can be valid even after 20 years.

Does a promissory note expire?

Depending on the state where you live, a promissory note may be valid for ten years or longer, but some state laws limit it to five years at the most.

What if someone defaults on a promissory note?

Defaulting on a promissory note means that you don't pay what you owe. When you take out a loan, the bank gives you money now in exchange for your promise to pay back the loan with interest by a certain date — and if your credit is good, at a lower interest rate. If you default on this agreement — meaning that you fail to make the payments as agreed upon — the bank can go after you for the money, which means they have the right to take your possessions or property.

When a party defaults on a promissory note, the injured party can enforce its claim by filing suit against the borrower on the underlying debt or alternatively, filing suit to enforce its lien against the collateral securing the loan. If the creditor pursues an action based on debt, it must file suit in state court and comply with all applicable state law requirements for perfecting a security interest in personal property, such as filing a financing statement. For example, if a creditor wants to foreclose on real property, it must first file suit on the underlying promissory note and secure a money judgment for the amount due on the loan or defaulted payment. Once that's done, it can file suit again in state court to foreclose on the borrower's interest in the real estate.

Is a promissory note an asset?

A promissory note is a liability for the borrower and an asset for the lender. It is considered an asset for the lender because they are confident that they will be receiving the promised money. The creditor will hold this note until its due date, at which point it is usually cashed out with interest.

How do you value a promissory note?

A promissory note is not often required to value. However, there are times when it is necessary to either know or have a basis for determining the value of promissory notes such as for estate planning, divorce, or even bankruptcy proceedings. Promissory notes are valued by a number of different methods. Of course, the value can be found in the document itself as it will list a future payment of cash which would allow you to simply calculate what that amount will be at a given point in time — whether now or some point into the future. Promissory notes are also valued by the application of certain factors found in the promissory note. These factors can be non-monetary items, circumstances, or events which affect either party to the agreement at some future time or date.

How do you end a promissory note?

You can end a promissory note by payment or cancellation. To end the note by payment, you pay it in full. To end the note by cancellation, you must follow state law for the cancellation of debt.

When a promissory note is paid in full, all legal action to collect on that debt ends. However, when a promissory note is canceled with an agreement between you and the promissory note holder, the promissory note is canceled but you may still owe money on the debt.

What is the difference between a loan agreement and a promissory note?

A loan agreement and a promissory note are both used to borrow money between parties. But, despite their similarities, there are important differences between the two documents.

A loan agreement is typically an unsecured document outlining the terms of borrowing financial capital from one party to another. This capital may include fees for initiating the arrangement — application fee or interest accrued on borrowed sums — interest. Additionally, a loan agreement may be attached to another unrelated contract, such as a lease. A promissory note is also used to borrow money between parties but this time it's secured against property or other collateral goods. In this case, the borrower will pledge their property as security in the event of non-payment. The pledged property then serves as a safeguard for the lender in case the borrower defaults on their repayments.

While a loan agreement is primarily used when borrowing money from a bank or other financial institution, a promissory note may be used in circumstances where the mortgaging of property or other collateral is required by the lending institution.

When compared, a loan agreement is more suited to borrowing money for personal use while a promissory note is used in the event of commercial or business loans.

What does it mean when the lender is processing the promissory note?

When the lender is processing the promissory note, it means that he or she is checking to make sure that the note doesn't violate any rules. The first thing that you should know about promissory notes is that they are considered legal documents. Thus, it's very important to be careful with your wordings.

How are promissory notes used?

Promissory notes are used by parties to a contract as evidence of the "IOU". In other words, it's a way of saying, "I owe you one." The issuer signs a written promise to pay a certain amount at a certain time or on-demand. However, it is not considered by the U.S. as real debt because there is no legal recourse to force the debtor to pay. For this reason, promissory notes are considered non-negotiable instruments.

When the issuer does not make an installment payment or otherwise breaches the obligations of the note, any party holding it may sue for all available damages. Lawyers classify these transactions as either simple or compound. A compound promissory note is one that specifies an interest payment while a simple promissory note does not.

In essence, a promissory note is used to acknowledge a debt and create a legal obligation to repay that obligation.

What are the advantages of promissory notes?

Some of the advantages of promissory notes are that they will almost always hold up in court and that it is a relatively easy way to borrow money. It's very simple for someone to say "I promise to pay you X amounts of dollars on this date." The one person says the amount, the other says the date. No lawyers need to be involved.

What happens to a promissory note when the lender dies?

Unless the borrower and the lender agreed that to forgive the debt at the death of the lender, the promissory note remains to be a debt. The debt needs to be repaid. The family of the borrower does not inherit the obligation. Debt can't be forgiven without a debtor and creditor agreement, nor by operation of laws such as at death.

It has become increasingly common for lenders and borrowers to discuss "forbearance" or repayment plans that postpone payments until after the lender's death. While this informal type of agreement may be legally enforceable, lenders are well-advised to execute a promissory note that includes language that reinforces the intent of the parties. It is advisable for borrowers to include in their agreements with lenders an explicit statement about how the debt will be repaid after death. For instance, you can agree to forgive payment of the debt — and the interest it has accumulated — and waive any claims to repayment or recovery of the principal from your estate. You can also agree to transfer your future right to collect on the note after death if you choose. A simple statement such as "I forgive this loan," "I will not seek repayment of this loan after my death," or "I will not seek repayment of this loan from any assets in my estate" can be added to a promissory note.

Where there is no written agreement, the estate of the borrower typically has a legal right to repay either all or part of the debt even if it was forgiven. In other words, an heir could be sued for the balance of the debt after the death of the borrower. A promissory note with language waiving any future repayment or collection against assets in an estate can prevent this hardship. It is also important to understand if your state's probate laws require that you list all outstanding debts in the will, even when they have been forgiven. If this is the case, you will need to designate how the debt should be repaid.

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