Security – Items such as vehicles or a second mortgage on a home are provided if the borrower does not repay the borrowed money.Origination Date – The day when the borrower receives the funds from the lender.Late Fee(s) – Penalties for late payment.First Payment Due Date – When the borrower will begin paying back the loan.All states have a maximum amount of interest a lender is able to charge.

Interest Rate – In other words, the fee for borrowing the money (See How to Calculate). Make sure to check the Interest Rate Laws in your state (or “Usury Rate”).

Due Date – When the borrowed money is supposed to be paid back in full.

Amount ($) – The amount of money being borrowed.

How to Create a Promissory Note (5 steps)īefore both parties sit down to write an agreement, the following should be verbally agreed upon: The lender will collect interest which acts as a fee for lending the money. The borrower receives the funds after the note is signed and agrees to make payments under the terms and conditions of the note.

How to Create a Promissory Note (5 steps)Ī promissory note is a written promise to pay back money owed within a specific timeframe.This means that if the payment is not made by the borrower, the lender would need to seek repayment in a small claims court or through other legal processes. Unsecured Promissory Note – This does not allow the lender to secure an asset for money loaned. If the borrower does not pay back the amount within the mandated timeframe, the lender will have the right to obtain the property of the borrower.ĭownload: Adobe PDF, MS Word, OpenDocument Secured Promissory Note – For the borrowing of money with an asset of value “securing” the amount loaned such as a vehicle or a home. Execution – Must be signed by the borrower.Maturity Date – Final date when the principal + interest must be paid.Interest Rate (%) – Percentage of the principal amount paid for the loan.

Principal Amount ($) – The original amount of money owed.The Parties – Full names and addresses of the borrower and lender.

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