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Promissory Note

Free Promissory Note

A legal document between the lender and the borrower, where the borrower promises to repay a loan to the lender.

A promissory note is a legal financial instrument, sometimes referred to as a note payable, that contains a written promise by the borrower to pay the lender a determinate sum of money, either at a fixed or determinable future time or on demand.

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Promissory Note FAQs


What is a promissory note also known as?

A promissory note is also known as the following: demand note, IOU “I owe you”, loan agreement, or promise to pay agreement.


What is a promissory note?

A promissory note is a legal instrument where the borrower promises to repay the loan owed to the lender under the terms of the note.  It’s essentially a promise to repay the lender.


Who is a co-signer for the promissory note?

The co-signer, also called a guarantor, is someone who is guaranteeing the loan and will be responsible for paying for the full amount of the loan if the borrower cannot repay the loan to the lender.


What should the promissory note cover?

The promissory note typically contains the following terms:

  • the original loan amount
  • interest payment, if any
  • repayment schedule
  • late fees, if any
  • collateral for the loan, if any

You can use our template and create a promissory note with the following steps:

  1. Select the loan’s location

This is the state where the lender lives and the promissory note will be customized to that jurisdiction.

  1. List the parties to the loan

Provide the names and addresses of the lender and the borrower. You may also include a co-signer or guarantor if there is one.

  1. List the terms of the loan

Describe how much is the loan amount.  Secondly, is interest being charged? If so, what percentage will the interest be and how will the interest be calculated and accrued. Thirdly, list the repayment schedule.  Typically, loans are repaid in instalments and payments can be made weekly, monthly, quarterly, semi-annually or yearly.  However, the loan can also be repaid in one lump sum, or at a later date based on the lender’s demand. You will also need to list the first and final payment date to the loan repayment schedule.

  1. List the prepayment teams

Loans can have prepayment penalty if the borrower repays it early because most lenders are interested in earning the most interest with the loan. You can decide whether to have a prepayment penalty in customizing this promissory note.

  1. Collateral

A collateral is an asset the lender accepts as security for a loan in case the borrower fails to repay the loan. This is typically reserved for risky borrowers that may not be as credit worthy and who tries to borrow a substantial amount of money.  For example, the borrower can use a car, or jewellery as collateral and upon default of the loan, the lender can go to small claims court to seize the collateral or other assets from the borrower in order to satisfy the failure of repayment.

If there is collateral to the loan, describe the collateral in detail to ensure there is no ambiguity what property is being used as collateral. For example, listing the year, make and model of the car, along with the VIN number. If it’s a piece of electronics, list the serial number etc.


Do I need to notarize my promissory note?

You only need the signature of the lender and borrower to have an enforceable promissory note. However having a notary to witness the document adds another layer of authenticity and protection in case the loan gets disputed in court in the future.  For loans involving substantial amount of money, it may be prudent to have it notarized.