Most often a Promissory Note is written or prepared by an attorney, bank or lending institution. However, individuals can write their own Promissory Note that will be considered legal and binding as long as the note includes all the specifically needed information.
The 4 Types writing a legal promissory note Promissory Notes Repayment Options There are generally four types of promissory notes, or repayment options. Choose the template that makes the most sense for your situation. You can download a blank promissory note below for free or create one using our state-of-the-art legal template builder.
Installment Payments — Installment payments are frequently used to buy expensive items like cars, boats, and appliances. Usually, the payments are made in equal monthly amounts, including interest, until the principal balance the total amount borrowed has been repaid.
Borrowers can place a down payment on the installment loan to reduce the total amount of interest paid, if they can afford to do so. Download free unsecured version Installment Payments with a Final Balloon Payment — Balloon payments are frequently used in mortgage loans, and typically used by short-term borrowers because they feature lower interest rates than longer-term loans.
Essentially, the borrower agrees to pay a low interest rate for a short amount of time, for example five years, and pays back only a fraction of the principal balance in that time. At the end of the term, the borrower has the option to reset the loan potentially at a higher interest rate or pay off the massive remaining balance the balloonif they can afford it.
Download free unsecured version Due on a Specific Date — For smaller loan amounts, borrowers and lenders can agree to a specific payback date.
Lenders will know exactly when they will be paid back, and borrowers will not have to worry about monthly payments. Instead, the borrower repays the entire amount of the loan — the principal plus any interest — on a specific date.
Download free unsecured version Due on Demand — Due on demand notes are usually used for loans between family and friends. As there are no specific payment terms, these loans are sometimes called open-ended loans. Borrowers can pay back the note when they are financially stable.
And lenders can be assured they will have an income source if necessary. If a note does not have any payment terms, it will be considered a due on demand note.
When Should You Use One? Promissory notes may be appropriate for a variety of situations. Here are some scenarios where you may need to use one: A note is an alternative to a conventional bank loan.
The traditional lender is a bank, the usual borrower has excellent credit, and the normal collateral is a home or other piece of real estate. In contrast, this document allows anyone to be a lender, the borrower does not have to consider their credit score, and the collateral could be any object from fine jewelry to a fur coat.
Instead of relying on a third party institution like a bank during a difficult borrowing environment, lenders and borrowers can directly negotiate with one another and think of creative solutions.
Similarly, borrowers with less-than-stellar credit benefit from non-traditional lending instruments like a note. Although unable to qualify for a traditional mortgage or line of credit from the bank, a borrower can use this document to slowly get on back on the path of good credit, own a car, become a homeowner, or start a business.
LT Tip Promissory notes provide a paper trail to the IRS and serve as a written record of a legitimate monthly loan payment between the borrower and the lender in an intra-family loan. The Consequences of Not Having One The consequences of not having a valid promissory note may be severe.
The following is a chart of the suffering that this document can help prevent:Create a custom rental agreement, lease agreement, promissory note, bill of sale and many other legal document with our online legal agreement wizard.
However, individuals can write their own Promissory Note that will be considered legal and binding as long as the note includes all the specifically needed information.
Include the date of the note clearly at the top of the page as this is the date all the terms are based from. Legal Promissory Notes are signed loan agreements often used when loaning money to friends or family. This sample Promissory Note template allows you .
This is a Master Promissory Note (MPN) for one or more Federal Direct PLUS (Direct PLUS) Loans. I request a Direct PLUS Loan under this MPN in an amount not to exceed my or (if I am a parent borrower) the student's annual cost of attendance, minus .
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It is provided as is, and isn’t necessarily endorsed or approved by metin2sell.com Due to the variances of many local, city, county and state laws, we recommend that you seek professional legal counsel before entering into any contract or agreement. Need a template for another document?
Browse our complete library of legal forms here. 2. The Definition: What is a Promissory Note? This is a written document that officially recognizes a legally binding relationship between two parties — a lender and a borrower.