How to Write a Promissory Note: A Step-by-Step Guide

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A promissory note is a legal document that states that one party (the borrower) promises to pay a certain amount of money to another party (the lender) on a specific date or upon demand.

Here is a step-by-step guide on how to write a promissory note:

  1. Identify the borrower and lender: Make sure to include the full name and contact information of both parties.

  2. Specify the amount of money being borrowed: Clearly state the amount of money being borrowed and the currency in which it will be paid.

  3. Set a repayment schedule: Specify when the borrower will repay the loan and if there will be any interest charged.

  4. Include any collateral: If the loan is secured by collateral, such as a car or house, make sure to include this information in the promissory note.

  5. Include a default clause: This should outline what will happen if the borrower fails to make the agreed-upon payments.

  6. Have the promissory note witnessed and signed: Have the borrower and lender both sign the promissory note in the presence of a witness, who should also sign the document.

NOTE: It is a good idea to consult with a lawyer when writing a promissory note to make sure all necessary information is included and the document is legally enforceable.

Sample 1 - Promissory Note Letter

To: [Name of Lender]

From: [Name of Borrower]

Date: [Date]

Re: Promissory Note

I, [Name of Borrower], hereby promise to pay to the order of [Name of Lender] the sum of $[Amount of Loan] on the following terms:

The loan will be repaid in monthly installments of $[Amount of Monthly Payment] starting on [Date of First Payment] and continuing on the same date of each month thereafter until the loan is paid in full.

The loan will accrue interest at the rate of [Interest Rate]% per year.

If I default on any payment, the entire balance of the loan will become due and payable immediately.

This promissory note is governed by the laws of the state of [State].

I understand that this promissory note is a legally binding agreement and that I am responsible for paying the full amount of the loan according to the terms outlined above.


[Name of Borrower]

Sample 2 - Promissory Note Letter

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 2022 and one hundred and seventy five dollars and no cents($175.00) due the 15th of August 2022 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 2024 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.






NOTE: This is just a couple examples of a promissory note letter. The terms of the promissory note will vary depending on the specific circumstances of the debt and the agreement between the borrower and the lender. It is important to carefully review and understand the terms of a promissory note before signing it

Frequently Asked Questions (FAQs)

1. What is a promissory note?

Answer: A promissory note is a legal document that outlines the terms and conditions under which a borrower promises to repay a loan to a lender. It serves as a binding agreement between the borrower and the lender and is often used in consumer and commercial lending.

2. What information is typically included in a promissory note?

Answer: A promissory note typically includes the borrower’s name and contact information, the loan amount, the interest rate, the repayment period, the payment due date, and the consequences of default. It may also include information on collateral, if any, that is pledged as security for the loan.

3. What is the purpose of a promissory note?

Answer: The purpose of a promissory note is to provide a written record of the terms and conditions of a loan and the borrower’s promise to repay it. It serves as a legally binding agreement between the borrower and the lender and helps to ensure that the loan is repaid as agreed.

4. What are the consequences of default in a promissory note?

Answer: The consequences of default in a promissory note can vary depending on the terms outlined in the promissory note, but may include late fees, legal action, and damage to the borrower’s credit score. In some cases, the lender may seize the collateral pledged as security for the loan.

5. Who holds the promissory note?

Answer: The promissory note is typically held by the lending institution, such as a bank or financial institution.

6. Can a promissory note be refinanced?

Answer: A promissory note can potentially be refinanced, depending on the terms outlined in the promissory note and the borrower’s creditworthiness. However, this should be discussed with the lending institution.

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