Every once in a while you might find yourself in a position to either borrow money from someone or be able to loan money to someone. When the world was a different place a simple handshake was all it took to seal the deal and that was that. Now however you never know who the person really is that is borrowing the money from you, and you need a little more security for that transaction. This promissory note template can help you create the right note in order to keep track of that transaction.
What is Promissory Note?
A promissory note is a legal, financial tool which makes the terms for a loan written. Banks and other financial institutions give a loan to people. It is the loaning agreement which is recorded on this note. It is actually not loan on itself but rather a binding document for the agreement. In the note, the amount borrowed is noted as well as the other agreements like when the money is to be paid back and at what interest if any. The document, therefore, binds the borrower to the law. In case the borrower failed to pay the loan as per the agreement in the promissory note, the lender may use the note to file a civil lawsuit on the person so that he or she can receive his money back.
What is Promissory Note Used for?
A promissory note is primarily used as a binding document between the lender, the borrower, and the law. First, it is used as documentation that the borrower and the lender are in agreement and that the lender is willing to go by the agreement. It, therefore, acts to remind the lender about their contracts so that he or she can abide by.
A promissory note can also be used as evidence or agreement in the court of law against the borrower. For instance, if the borrower fails to comply with the agreement and has probably come up with other issues which were not part of the agreement, the lender may use the note as evidence of what the agreement was.
An example of a promissory note:
‘I, Henry Joshua admits to having borrowed $4500 from Lyne Mercy and will repay the whole amount on January 12, 2019, with an interest rate of 12% per month.’
Promissory Note Templates
These promissory note templates are simple to use and has everything in it that you might need to keep up on the transaction. By using these promissory note templates, you are letting each person involved in the transaction know that it is a serious transaction and that payment needs to be paid back at the time specified. These promissory note templates can be edited to add all the information you need giving it a professional look and keeping the locations for signatures open. This makes it easy to use, and all you will need to do when done making your changes is print and sign the agreement.
A promissory note will hold up with a lawyer and with the court as well, as it is a legal promise between two parties concerning funds of items passing between them. It also can be used by the person borrowing the money and not just the lender. It shows the lender that the borrower means business and has a plan to pay back what they owe. By using the promissory note you are almost securing your funds, and at the very least know where they are, and when they will be coming back to you.
How legal is a Promissory Note?
A promissory note is a legal document. However, if it is not well designed, then it may fail to act as evidence in the court of law. It has not to be done on a specific type of paper. Even an email or text message can serve as a promissory note. It is upon you to now make it legal by ensuring that it has all the information which you would need in a court of law in case the borrower fails to pay. The necessary information which must be included in a promissory note to make it legal include the name of the lender and the borrower, the amount borrowed, the interest rate, the exact amount to be paid back and at what time and also the signature of both the borrower and the lender. Failure to include such may make your note not to fit the legal requirement.
How do you write a Promissory Note?
Writing a promissory is not difficult. You only need to have a template in case you do not know how to the right one. You can always get the paid templates online. Whichever the template you choose, you need to ensure that you include the following details:
- The name and signature of the borrower
- The amount borrowed and date of borrowing
- The interest rate annually or monthly
- When to pay the whole amount
- The method of payment, whether in bits or lump sum
What makes a Promissory Note Valid?
There are two things which validate the promissory note especially when it deals with a financial institution and a borrower. The first one is the signature of the lender and the borrower. Without the signature, it may be difficult to prove that you concluded the agreement process.
The second one is the stamp or the company seal of the lender firm. This is what makes the document to have authority. Without the stamp, the borrower may decline that he or she does not know the organization which is demanding of pay from him or her.
Promissory Note Samples
It would be a wise thing for both the lender and the borrower can have a copy of the promissory letter. This limits any possible changes in the information on the note. Otherwise, an excellent promissory note is a legal document binding the borrower and the law of the state and so can be used in the court of law.