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Promissory Note

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Frequently Asked Questions

What is a Promissory Note?A Promissory Note is an enforceable agreement between friends, family, colleagues, business associates, or others, to pay back a loan or debt by a stated time, or upon demand. When should I use a Promissory Note?Use a Promissory Note when you want a legally enforceable agreement that lays out the terms of a loan or debt, such as the amount, payment terms, or other conditions.


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PROMISSORY NOTE
(this "Note")


         


         

Borrower:

__________ of __________, __________, VA, __________ (the "Borrower")

Lender:

__________ of __________, __________, VA, __________ (the "Lender")

Principal Amount:      $_____________ USD

  1. FOR VALUE RECEIVED, The Borrower promises to pay to the Lender at such address as may be provided in writing to the Borrower, the principal sum of $_____________ USD, with interest payable on the unpaid principal at the rate of _________ percent per annum, calculated yearly not in advance, beginning on June 24, 2017.
  2. This Note will be repaid in full on June 24th, 2017.
  3. At any time while not in default under this Note, the Borrower may pay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
  4. All costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by the Lender in enforcing this Note as a result of any default by the Borrower, will be added to the principal then outstanding and will immediately be paid by the Borrower.
  5. If any term, covenant, condition or provision of this Note is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Note will in no way be affected, impaired or invalidated as a result.
  6. This Note will be construed in accordance with and governed by the laws of the Commonwealth of Virginia.
  7. This Note will enure to the benefit of and be binding upon the respective heirs, executors, administrators, successors and assigns of the Borrower and the Lender.  The Borrower waives presentment for payment, notice of non-payment, protest and notice of protest.

IN WITNESS WHEREOF the Borrower has duly affixed their signature under seal on this 24th day of June, 2017.

SIGNED, SEALED, AND DELIVERED
this 24th day of June, 2017.

   


_______________________________
__________

     

Promissory Note

Alternate Names:

A Promissory Note is also known as:

  • IOU
  • Loan Agreement
  • Notes Payable
  • Demand Note
  • Commercial Paper

What is a Promissory Note?

A Promissory Note is a legal form that documents a loan between two parties. It enforces a borrower's promise to pay back a sum of money to a lender within a specific time period.

Common uses for a Promissory Note:

  • Private or personal loans between family members, friends or colleagues
  • Student or educational loans
  • Real estate loans, mortgages, or property down payments
  • Bank loans
  • Commercial or business loans
  • Car or vehicle loans

Should I use a Promissory Note or Loan Agreement?

A Promissory Note is generally used for straightforward loans and basic payment terms. A Loan Agreement is used when a more complex payment plan is needed. Whichever you choose depends on the terms you wish to include and your personal situation.

How to create your Promissory Note:

Parties

Identify the lender and borrower. The lender may be a corporation or individual.

Payment Plan

Choose a schedule for when the loan needs to be repaid, including how the borrower will make his or her payments and how often. Payments can be made weekly, monthly, or yearly.

Amount

While the loan amount may be straightforward, you will need to decide whether to charge interest and if it will be compounded monthly or yearly.

Collateral

As part of your Promissory Note, there may be an option to include collateral or security. Collateral is protection for the lender against a borrower's default. If the borrower defaults, the lender can become the owner of the collateral or sell it to pay the outstanding amount. Collateral may be a vehicle, jewelry, or other assets worth the equivalent or more than the loan itself.

Amendments

Amendments to the Loan Agreement can only be made if both the lender and borrower agree to change the terms.

Signatures

Once complete, the loan contract should be signed by both the lender and borrower to bind the terms.

Collection

After the terms are signed, the borrower is expected to make payments regularly according to the agreement. If the borrower defaults on a payment, the lender may demand the whole amount immediately as well as charge a higher interest rate until the lender is paid.

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Frequently Asked Questions:

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