Promissory note template is a note sample with predefined style and format that shows the terms and conditions of one party to the other party for the repayment of loans at a fixed or determined future time. A well defined promissory note sample can help both the lender and borrower to protect their rights.
Promissory Note Design
Promissory note needs to understand the difference between personal promissory note and commercial promissory note. Personal promissory note is often used when you make loans to your friend or family members, the format of the personal promissory note is less formal, but demonstrates good faith and effort on behalf of the borrower. Commercial promissory note is often used when dealing with commercial lenders such as a bank or financial institutions.
Promissory note needs to understand the difference between secured promissory note and demand promissory note. A promissory note is typically unsecured obligation without any securities or collateral. In the event that the borrower default, the lender may have difficulties in get the loan back. Security promissory note usually have some forms of securities or collateral in your loan agreement to secure the loan. Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand of the lender. Usually the lender will give the borrower a few days notice before the payment is due.
Promissory Note Template Outline
There is free note template you can download for reference, however, you may design your sample promissory note template based on the credit terms and requirements if you use common software such as Word or PDF. During the development process, it is important to consider the promissory note format, promissory note layout and promissory note outline in the promissory note form.
The first key part in the promissory note template is the header. In the section, you need to give details of the borrower and lender and loan information and promissory note definition. For example, The Lender Name:__; Lender Address:__; The Borrower Name:__; Borrower Address:__; Loan Information:__ etc.
The second key part in the promissory note sample is the main part. In the section, you need to give details of the loan agreement. For example, For value received, ___ (state the name of borrower) promises to pay _____ (state the name of lender) $_____(state the amount of loan) and interest at the yearly rate of _____% on the unpaid balance as specified. Borrower may prepay all or any part of the principal without penalty. etc.
The third key part in the promissory note example is the default and security terms. In the section, you need to define the conditions of default and security for the promissory note. For example, In the event the borrower defaults in any payment beyond ______ days from the agreed date of payment, a late penalty charge of ____ will apply. Borrower agrees that until the principal and interest owed are paid in full, this note will be secured by the following collateral:__ etc.