» Promissory Note Templates

Promissory Note Templates

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A promissory note is a form that promises to pay an amount between a borrower and a lender. The party that is making the money available to the debtor takes the risk of not getting their money back in return for obtaining more money at the end of the note by receiving the full balance plus interest. An interest rate is the price the borrower must pay to hold the money for a period of time and is compounded annually.

Types

Secured Promissory Note – For the borrowing of money with an asset of value “securing” the amount loaned such as a vehicle or a home. If the borrower does not pay back the amount within the time-frame suggested the lender will have the right to obtain the property of the borrower. Example – When money is loaned by a Pawn Shop. The borrower offers value in the chance the loan is not paid off by the time it is due. The Pawn Shop would then keep the “secured” asset as full-payment.

Unsecured Promissory Note – Does not allow the lender to secure an asset for money loaned. This means that if the payment is not made by the borrower that the lender would have to either file in small claims court or through other legal process.

Related

I Owe You (IOU) – A receipt acknowledging a debt that is owed with no time-table for payment.

Loan Release Form – When the note has been paid-in-full, the lender should set the borrower free of all liabilities by authorizing a release form.

By State

How to Calculate

As an example lets calculate if a borrower requests a thousand dollars ($1,000) at a rate of six percent (6%) interest over four (4) months. Let’s also say that the payments are to be once per month. The total amount for the loan (principal + interest) would be one-thousand and twenty dollars ($1,020).

  • Principal – $1,000;
  • Interest Rate – $20 (calculate by multiplying $1,000 * 0.06 = $60, then divide by 3);
  • Total – $1,020;
  • Payments – $255 per month.

The interest rate is regulated by the State the note is being originated. This is known as the Usury Rate. There is a maximum rate for every State in order to protect consumers from being charged excessively high rates for borrowing money.

Usury Laws By State

 How to Write

Step 1 – Download the document – Begin by submitting the following:

  • The start date of the document in dd/m/yy format
  • The borrower’s name
  • Borrower’s mailing address
  • AND
  • Enter the Lender’s name
  • The Lender’s mailing address
  • AND
  • The lender must enter the principal amount of the loan in words and numbers
  • Submit the interest rate (percentage annually)

Step 2 – Payments – Enter the date (in dd/m/yy format) that the full balance of the loan is due to include interest and late fees (if any)

Installments – Check the agreed form of repayment

  • Enter the applicable amount
  • If the borrower is making installments, check the box indicating the agreed frequency of repayment
  • The lender must enter the late fee expected if the payment is not on time

Step 3 –  Security –

  • The lender must check the box reflecting the level of security
  • Should the loan be “secure,” enter the property provided to secure the loan
  • The borrower must carefully read and understand the remainder of this section

Step 4 – Titled Sections – The borrower must carefully review and understand all of the titled sections as follows:

  • Interest Due in the Event of Default
  • Allocation of Payments
  • Prepayment
  • Acceleration (and 6A. – Security)
  • Attorney’s Fees and Costs
  • Waiver of Presentments
  • Non-Waiver
  • Severability
  • Integration
  • Conflicting Terms
  • Notice
  • Co-Signer – Select and check the appropriate box – (If there will be a co-signer, check the box and enter the name of the Co-signer’s name)
  • Execution
  • Governing Law – Enter the state in which the note shall be governed

Step 5 – Signatures – All signatories must sign in the presence of a witness – Submit:

  • Lender’s signature
  • Date of signature in mm/dd/yyyy format
  • Lender’s printed name
  • AND
  • Borrower’s signature
  • Date of signature in mm/dd/yyyy format
  • Borrower’s printed name
  • AND
  • Co-signer’s signature (if any)
  • Date of signature in mm/dd/yyyy format
  • Co-signer’s printed name
  • AND
  • Witness’ signature
  • Date of signature in mm/dd/yyyy format
  • Witness’ printed name

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