While the concept of the promissory note has more than likely been around since the dawn of hard currency, the actual concept of the note dates back to the early 10th century.

It has changed very little over time. It is basically a simple type of agreement and/or mutual legal arrangement. Or at least, it should be in most cases. The idea still remains the same, which is: one party makes a written oath to repay a debt to another party for prior monetary value received. Modern day notes have several basic legal elements, which of course, include the parties. That is, the person who owes the debt (i.e. the payee), and the lending party (i.e. the maker). Others are the sum to be repaid, and the terms of repayment subject to the note.

In addition, there is the interest rate (if it is applicable that is) and the maturity date. Today's more refined promissory note encompasses even more. Most will have a governing law clause or other important legal provisions. Usually most will have an "acceleration clause" whereby the specified repayment terms speed up (in the event where the entire sum becomes due and payable) in a special happening. This is usually the case when the maker forgoes a payment. A promissory note form (i.e. legal document) is a detailed and written personal promise to repay a sum of money to somebody else.

How Can A Note Be Used?

It can be used to create a legal and binding agreement when lending money or even financing the sale of personal items and real estate property. Payment can be scheduled to fit a persons specific, individual needs and requirements. It's a matter of simply setting out the terms and conditions of the loan in an "unsecured promissory note" or a secured note.

Important things to consider are: "how much is going to be loaned, the amount of interest and rate (if any at all), the rate of repayment you wish to schedule", and the security interest. You can even have the entire amount become due and payable on a certain date. The templates on this web site are written in plain English. Simply, insert all pertinent information along with the terms and conditions of the note in the blank spaces provided.

Promissory Note Miscconceptions

There are a few borrowers who believe that a note (which is signed and dated with a private person lender) is somehow much less enforceable than say a legal note signed with a bank. This could not be further from the truth! There is no noticable or marked difference in the enforceability of an installment note, no matter whom the lender is, and this is an important thing to always remember. Once the note is duly signed and dated it is legally binding, and the failure of a borrower to perform under its terms and conditions becomes legal grounds for default and foreclosure of the loan.

Note Functionality

The functionality of a note is to outline in detail the specific amount and terms of a loan and in addition, to provide signed evidence of the receipt of the loan proceeds. That is to say, the actual commitment by the borrower to repay the loan completely. In the case of a commercial bank loan, the note will include a detailed "repayment amortization schedule" and in most cases will outline the full amount of interest as well as the principal payments over the life of the loan.

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