If you are a lending or borrowing money use this promissory note to create an unconditional promise to have all debts repaid. Creating a legally binding promissory note means you can feel protected and assured as you have recorded the transaction and set out repayment terms. This promissory note will help you outline all the specific terms regarding the repayment, from the parties involved, to the date of repayment and even whether interest is payable.
When should I use a promissory note?
Use this promissory note:
- when someone or an organisation owes money as a result of a business transaction
- when you want to create a legally enforceable contract for repayment of a sum of money (a debt)
- when you know who or what organisation owes the money
- when the amount to be repaid is certain and the time scale for payment has a fixed start and end date
What's included in a promissory note?
This promissory note covers
- the parties to the note
- the amount to be repaid (the debt)
- the date by which the debt is to be repaid
- whether interest is payable and if so how much
- other terms and conditions used in contracts for loans
What's a promissory note?
A promissory note records a loan between two parties (it can be one or more companies or individuals). The promissory note sets out when the loan will be repaid, either in full or in instalments. It outlines the specific terms regarding the repayment, including the parties involved, the date of repayment and whether interest applies.
Do I need a promissory note?
You need a promissory note if you want to ensure that the debt will be repaid. This note is legally binding on the party that owes the money and properly records the transaction and repayment terms.
What are the payment options available?
You can choose to set a date when the loan must be repaid or to order the payment in instalments. This note allows you to clearly state the time of each instalment and the last date on which final payment is made.
When is a loan secured?
A secured loan is a loan secured by a mortgage or trust deed or valuable item. In this note you can choose to secure the loan by a collateral agreement, i.e. a guarantee or security for payment of loan.
Can I claim interest on the debt?
Yes, this note allows you set out the interest rate and therefore claim contractual interest on the debt.
What happens if the borrower fails or is late to repay the debt?
If the borrower fails to or is late to repay the debt, the full balance of the total amount becomes payable immediately, including the interest.
Ask a lawyer for:
- debt recovery procedures
- advice on recovering debt for organisations based outside England and Wales
- advice if you intend to enter into loan agreements with individuals or small businesses more than merely occasionally, as you may need a credit licence