The Law Office of Michael L. Dear is an Orlando law firm that works with drafting and reviewing promissory notes as well as various types of documentation. We can assist you in creating a solid promissory note that meets your legal needs. The following information will help you to understand the basics of promissory notes.
What are promissory notes?
A promissory note is a written document where one party promises to pay another party. The note includes the amount the borrower is to pay to the lender as well as the time in which the payment is due. Promissory notes are legally enforceable, and the borrower is liable for repaying the loan. Promissory notes are most commonly used in financial transactions, but they have a wide variety of applications.
A promissory note is a financial instrument that contains a written promise made by one party to pay another party a specific amount of money either at a specified future date or on-demand. It is only legally enforceable if it meets legal conditions such as offering an agreement and the acceptance of said agreement. It must contain the terms of debt such as:
- The debt amounts
- Interest rate
- Late fees
- Maturity date
- Place and date of issuance
- Issuer’s signature
- Consequences of default
- Repayment schedule
- Any collateral used to secure the loan
Furthermore, the promissory note may also contain penalties for late payments, order payment be made to another person on their behalf, attorney fees and cost provisions, and whether the note is secured by the deed of trust or mortgage.
What are the applications for promissory notes?
Most commonly, promissory notes are used in loans. The notes are very common in lending situations as a form of formalizing the loan. They can be used for:
- Business Loans
- Student Loans
- Automotive Loans
- Personal loans (between friends and family)
What Should Be Included in a Promissory Note?
Promissory notes are created as a way of securing the value of a loan and ensuring repayment. Including all the necessary terms and details of the loan in the promissory note is essential to creating a legally valid document. The note will serve as a record of the loan and help ensure that you will be repaid. A promissory note should include the following:
- The names and addresses of the lender and the borrower
- The dollar amount of the loan
- Any collateral being used to secure the loan
- The dollar amount and due date of the payments
- Signatures from both parties to ensure the note is legally enforceable
The above details listed in the promissory note help both parties understand what is required of them and what terms they must follow. If the loan includes collateral listed in the note, the lender may seize the collateral in case the borrower does not repay the loan. Some complex promissory notes covering mortgages, car loans, and other transactions may include interest rates, amortization schedules, and other additional details.
Types of Promissory Notes
- Simple: A simple promissory note lists a lump sum loan that is due on a certain date.
- Demand: A demand promissory note lists the due date as time of the lender’s request for payment. Usually, a reasonable amount of notice is for payment is required.
If you are unsure of what terms to include in a promissory note, or would like assistance with drafting and review, contacting an attorney can help. To ensure that all the fundamentals are met successfully, it is best to work with a promissory note attorney in Orlando who is experienced in this domain.
At the Law Office of Michael L. Dear, we can draft a promissory note on your behalf that will allow you to:
- Formalize an agreement to loan or borrow money
- Loan money to a business or private party with all the terms in writing
- Prepare an amortization table of the loan including interests
- Set the amount of monthly payments on a loan
Get in Touch with an Orlando Attorney Today
The Law Office of Michael L. Dear assists and advises individuals in Orlando with promissory notes. We can help you with documentation review and simplify the process. For more information about promissory notes and to speak to an attorney, contact us at 407-494-6105.