By going through the sample mentioned in this article, you will be able to know what to include in promissory notes so that it stands as a perfect legal document and fit for your purpose.
Borrowing money from financial institutions or private money lenders is one of the characteristic features of an economy. So, if you’re willing to take some loan from a bank, you will have to fulfill several eligibility criteria established by the banks. In several cases, even if you have submitted all the documents and numerous other formalities are finished, you’ll be asked to fill a form, before the money is handed over to you.
These forms are promissory notes that are legal contracts written by the lender or the borrower that contain an agreement between you and the lender that you are supposed to sign. This documented agreement will act as a proof that you are obliged to pay back the lender the borrowed money within the stipulated time. Since these notes are going to act as legal documents in case the loan is defaulted, writing them effectively is of crucial importance. So, in essence, following are the important points regarding these notes.
- A Promissory letter is just like a promise to the lender that you will return the loan amount within the time period as stated by the terms of the promissory note.
- They’re a form of debt instrument and the terms drawn in them are commonly agreed by the lender and the beneficiary, both. The borrower signs the terms and conditions and thereafter it becomes a legal document of immense value.
Promissory Note Example
The example mentioned in this article will give you some idea about these notes and what to include in the contents their document. Generally, the lender uses these notes depending on his or her requirements. One can also find several customized templates and samples on numerous websites.
|Date: 26th December, 2011
Principal Amount: US$ 5,60,000
For value I received, I Marcus Phil (name of borrower) the undersigned promises to Paul Mackenzie (name of lender) the sum of US$ 5,60,000 in consecutive, monthly payments of US$ 5000 (monthly installment) commencing on this date of 26th December, 2011, (mention the date) and thereafter on same day of each and every subsequent month until fully paid. In the event the borrower defaults in any payment beyond 25 days from the agreed date of payment, a late penalty charge of US$ 20 per month per day will be assessed until all the amount is paid back. This will include the interest, late charges and applicable fees. The papers regarding the legal matters concerning all transactions will be send the address as mentioned in the loan form. The borrower must inform the lender in any case of address change. This note may be prepaid by the borrower at any time in whole or parts without premium or penalty.
Borrower agrees to pay all the cost of collection, legal expenses and lawyer fees, incurred or paid by the lender in collection and enforcement of this note.
In witness whereof, I set my hands under seal this 26th day of December 2011 and I acknowledge receipt of a completed copy of this instrument.
Notice/Seal of Authority
This is a simple sample that highlights the important features of promissory notes. It is crucial to get such official documents notarized as that helps in making them a full-fledged legal document. It is essential for the borrower to carefully read the terms of repayment to avoid any confusion in the future. Promissory notes can also be elaborated in detail by adding several clauses or terms and conditions as per the expectations of the lender. It is recommended to save the hard and soft copies of such vital documents for any future references.