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What is a Promissory Note?

A Promissory Note is a loan agreement- is a legal document which defines the details of a loan made between two people. This document clearly outline the borrower’s promise to repay the loan in full amount, within a specified time. This serves as a written record of transaction and the borrower’s intention.

Why do you need a Promissory Note?

A promissory note is generally a way of deciding the agreement between the two parties. The agreement establishes the dates, terms, amount of each payment due. Without one you may not get paid on time.

  • An unsecured promissory note exists to a loan that’s made solely pon the maker’s ability to repay.
  • A secured promissory note means that the loan is secured by an item of high value like, house.

What are the Characteristics of a Promissory Note?

  • A promissory note must be written in an oral commitment
  • It is a commitment to pay the money at a specific time
  • The document is signed, drawn and stamped by the drawer
  • The promise to pay a specific sum must be absolute
  • A conditional assurance is not recognized in such notes

Why is a Promissory Note Important?

Promissory Note provides flexible options to obtain funds very easily. Inserting the financial terms in writing protects both the lender and the borrower. This document is legal record of the agreement and will help in making sure that the money is paid in full.

Do I Need Witnesses to Sign the Promissory Note?

No, there is no requirement for a witness to witnes the signing of a promissory note. So, a witness might need to present while you sign the promissory note if state-specific laws require it.

Even if it is not required, having a third part objective witnessing the signing of the note will be a better evidence if you need to encourage the agreed-upon repayment of the note.