Writing a Promissory Note for a Personal Loan (with Sample)

A “Promissory Note” is a promise to pay a debt that is put in writing. These documents may also be known as a loan note or a loan agreement and is sometimes called an I.O.U. 

In most cases, the promissory note will be prepared by a loan officer at a bank or lender, but it can also be prepared by a lawyer. It is possible to write a promissory note by yourself and it will be a legal and binding contract. However; it must include specific information to be legal. 

Terms of the Loan

Start with the date, as this is an important part of any loan note. The terms of the loan will be based upon the date the note is written. Be sure to clearly write out the amount the loan is for. 

Put it both in word form and number form lest there be any confusion. It would be similar to how you would write a check. The amount borrowed in the note is considered a principal sum. Since this is a note of repayment an errors can affect the payback amount. 

The terms of the note must be clearly written. If the debt is to be repaid weekly, bi-weekly or monthly, it needs to be spelled out. 

Loan Type

Some loans will have a balloon payment, especially at the end of the note. If this is the case, this also needs to be clearly spelled out with the date due. It must clearly state when the first payment is due and the amount that is expected. 

First Payment

The first payment may be due at a different time than the other payments. The language of the note needs to specify a payment schedule to make sure it is clear. 

Final Payment

The final payment should also be clearly spelled out with the month, day and year that it is due. Some promissory notes will include an amortization schedule, but it is not always included. This schedule will show each payment and the balance on the loan at that payment time, with the current interest rate. 

All loans have an interest rate. Like the amount of the note, the interest rate must also be in numeric and written form. Included should be an address or method how the payment needs to be paid. 

Interest Rate

It should also state if the interest rate is fixed or variable. If the loan is secured by some item(s), it needs to be stated. If the loan is unsecured that should also be written. The lender’s name and borrowers name should both be clearly listed on the note. 

There should be spaces provided for both parties to sign the document, which officially enters them into the agreement. Here is a sample note. 

Sample Promissory Note for a Personal Loan

The undersigned agrees to pay to Robert and Janet Calhoun the principal sum of Five thousand, six hundred and seventy five dollars and no cents. ($ 5,675.00) This note also includes interest of six percent (6%).

The principal amount, including interest, is payable in payments as follows: two hundred and seventy five dollars and no cents ($275.00) on the 1st day of August 2018 and one hundred and seventy five dollars and no cents($175.00) due the 15th of August 2018 and every month thereafter until this loan is paid in full. 

All installments are due on the 1st and 15th day of each and every month thereafter until this Note is fully paid. The only exception is the final payment, if not paid at an earlier date, which will be due on 21st day of July 2019 in the amount of thirty nine dollars $39.00). All payments made will be first applied to interest and then principal balance. 

Payments are to be by mailing to 7689 Stone Ridge Blvd. Reynoldsburg, Ohio 43068. The lenders reserve the right to change the address in writing if necessary. It may become necessary for the lenders to secure the amount of said note. 

The undersigned agrees that this note may be revocable due to non-payment of any collection costs, such as court, and other collection activities will be added to the balance. Should the lender exercise this option, the entire unpaid balance of the loan and interest becomes due and payable immediately. Reasonable collection activities may include attorney fees and obtaining a judgment. 

By signing this document, both parties agree to the terms and guidelines laid forth. 

___________________________ 
Borrower 

___________________________ 
Borrower 

____________________________ 
Lender 

____________________________ 
Lender