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Free Promissory Note Template

Start a promissory note to formalize a loan and create security for a lender issuing money to a borrower. Create your own debt note easily today with step-by-step instructions and form builder tools.

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What is a Promissory Note

A promissory note is a note payable form whereby a borrower promises to repay someone who has issued a loan to them. 

It has much in common with a loan agreement, although it differs in that it creates a more informal agreement that only binds the borrower and not the lender. 

It functions in a very similar way to an IOU note, detailing information about what one person owes another.

However, Promissory notes are overall much more robust and legally enforceable, providing much better protection for lenders issuing loans.

Types of Promissory Notes

Different Promissory Notes exist and depending on your situation one type may be better for you than the other. 

There are the two types of Promissory Notes that you could use: 

  • Secured Promissory Note: This type of Promissory Note is used when the lender wants to secure collateral, for example, a vehicle or television. If the borrower does not pay back the money in time, the lender has the right to claim the property. 

  • Unsecured Promissory Note: If you do not want to secure any collateral, you would use an Unsecured Promissory Note. However, if the borrower does not pay back the money, the lender must file in a small claims court.

When to Use a Promissory Note

A promissory note can be used in many situations. In most cases, they are utilized for small loans and lending between close family and friends. However, it can also be used for:

  • Real estate loans and mortgage down payments

  • Student loans

  • Vehicle loans

  • Investment financing

Using a legal document such as allows you to document essential details. This includes information such as the parties involved, when the money must be repaid, and any interest that should be paid on the capital that has been borrowed.

How to Write a Promissory Note

Promissory notes may be more informal than full-blown loan contracts and financing agreements but they must still be carefully written. This is still an enforceable legal document and therefore care should be taken in how it is worded.

The document should be written in clear and plain English, using full sentences. It needs to also adequately cover the key information that helps identify all the parties in the agreement and that documents when payment will be due.

A successful promissory note will usually include the following details:

  • The names of the lender and the borrower

  • How much money is being lent

  • How the money will be repaid (either all at once or via a repayment plan)

  • Whether interest will be paid on the borrowed money

  • Whether any collateral will secure the loan

  • What will happen if the borrower defaults

To correctly add this information into your Promissory Note, you must complete the following steps.  

  1. Add the date of validity: Enter the date that the Promissory Note will begin to take effect. 

  2. Mention the parties: Provide both the full names and complete addresses of the borrower and the lender. 

  3. Include the loan amount:  Add the principal sum (amount being loaned) and what the interest rate will be. 

  4. Explain payment terms: State the day when the loan amount must be paid back, and if it will be paid in one lump sum or in installments. 

  5. Choose a secured or unsecured loan: Select if it will be a secured or unsecured Promissory Note (with collateral or without), and if there will be any fees for late payments. 

  6. Decide to include a co-signer or not: Select if the Promissory Note will have a co-signer or not. 

  7. Mention the Governing Law: Add which state’s laws will govern the Promissory Note. 

  8. Sign the Note: Sign the Promissory Note along with the other party and any co-signer’s signature or witnesses signature. Include the date of signing and the printed name as well. 

Our promissory note template and step-by-step survey will help you create a legally binding and professional document that looks the part and works effectively.

It will help you identify the key information that must be found within your form for it to be valid and enforceable.

Our promissory note template and step-by-step survey will help you create a legally binding and professional document that looks the part and works effectively.

It will help you identify the key information that must be found within your form for it to be valid and enforceable.

Calculate Loan Interest Rate

Loans that have been bound by a promissory note can charge interest on the principal sum of money like those secured with loan agreements. Adding interest is highly advised to protect against the borrower defaulting and the money not being paid, especially if the loan is not secured against any collateral and is longer-term in nature. 

However, it’s important to remember that state usury laws apply when using debt instruments that levy interest. This is also true for your promissory note and could be a factor when creating your own document and charging interest.

Usury Laws by State

Each state has its own usury laws and these must be followed in order for a promissory note, or indeed any debt instrument, to be legally valid. If you have decided to charge interest on the loan amount, make sure to adhere to these rules.

If you’re unsure what the maximum interest rate in your state is, be sure to refer to our table below with the details on what can be charged in each area.

State Law Maximum Interest Rate
Alabama § 8-8-1 8% for contracts in writing, 6% for verbal agreements
Alaska § 45.45.010 5% above the 12th Federal Reserve District Interest rate on day loan was created, or 10%, whichever is larger (loans less than $25,000). No maximum interest rate exists for amounts over $25,000
Arizona § 44-1201 No limit exists for loans in writing 10% per annum for any loans not in writing
Arkansas § 4-57-104 Cannot exceed the 17% maximum established in the Arkansas Constitution (Amendment 89)
California {' '} § Article XV 10% for personal, family, and household loans. The highest of 10% or 5% over the amount charged by the Federal Reserve Bank of San Francisco
Colorado § 5-12-103{' '} & § 5-2-201 45% maximum interest rate for supervised loans 12% maximum interest rate for unsupervised loans
Connecticut § 37-4 The limit is 12%
Delaware § tit. 6,2301 5% limit over the Federal Reserve Discount rate at the time loan was created
Florida § 687.03 18% on loans below $500,000 25% on loans over $500,000
Georgia § 7-4-2 5% per month on amounts over $3,000 7% without a written contract 16% on loans under $3,000
Hawaii § 478-2,{' '} § 478-3, & § 478-4 10% limit without written contract 12% is the general maximum interest rate 10% is the maximum on judgments
Idaho § 28-22-104 The general maximum rate is 12% The maximum rate on court judgments is 5%
Illinois § 815 ILCS 205/4 9% general usury limit
Indiana § 24-4.6-1-102 {' '} &{' '} § 24-4.5-3-201 8% is the maximum without an agreement 25% for consumer loans that are not supervised
Iowa § 535.2(3)(a) The general maximum interest rate is 5% If the interest
Kansas § 16-201 &{' '} §16-207 10% legal interest rate 15% general maximum interest
Kentucky § 360.010 8% legal rate of interest Maximum interest rate is 4% larger than the Federal Reserve rate (or 19% whichever is less) There is no limit when stated in a written contract with a loan larger than $15,000
Louisiana § 9:3500 12% general maximum interest rate
Maine § titl. 9-B, § 432 6% legal interest rate (no maximum in any statute)
Maryland § 12-102 {' '} –{' '} 103 6% legal interest rate 8% maximum interest rate with a written contract
Massachusetts § 3 &{' '} Ch. 271, § 49 6% legal interest rate without a written contact Normally does not go over 20% (if part of contract)
Michigan § 438.31 5% legal rate 7% with a written contract
Minnesota § 334.01 6% legal rate of interest 8% maximum interest rate for written contracts No limit if the amount is over $100,000
Mississippi § 75-17-1 8% legal rate of interest The rate may be increased up to 5% or 10% above the Federal Reserve discount with a contract
Montana § 31-1-107 The highest of 15% or 6% over the Federal Reserve System rate
Nebraska § 45-101.03 16% maximum usury rate
Nevada § 99.050 The least of 36% or the maximum rate allowed under the Military Lending Act
New Hampshire § 336:1,{' '} § 358-A:2 No legal limit exists for interest rates
New Jersey § 31:1-1 6% without a written contract 16% with a written contract
New Mexico § 56-8-3 15% maximum without a written contract
New York § 5-501 &{' '} § 14-A 6% legal interest rate 16% general usury limit
North Carolina § 24-1 8% legal rate Consumers and creditors are allowed a higher contractual rate
North Dakota § 47-14-09 5.5% maximum interest rate above the current maturity rate of Treasury bills for six months prior to the issuance of the loan for written contracts less than $35,000, or 7%, whichever amount is greater
Ohio § 1343.01 8% interest rate in any written contract
Oklahoma §266 6% legal rate of interest without any contract
Oregon § 82.010 9% legal interest rate 15% or 5% greater than the 90-day discount rate of commercial paper for business and agricultural loans
Pennsylvania § 201 6% interest rate
Rhode Island § 6-26-2 21% or domestic prime rate plus 9% maximum interest rate
South Carolina § 37-3-201 10% maximum interest rate unless stated otherwise in a contract
South Dakota § 54-3-4 {' '} &{' '} § 54-3-16(3) No limit exists for written agreements 12% maximum interest rate without a written agreement
Tennessee § 47-14-103 10% maximum interest rate unless stated otherwise in a contract
Texas § 302.001(b) 10% interest rate Can be higher if the loan is provided by contract law
Utah § 15-1-1 10% maximum interest rate unless stated otherwise in a contract
Vermont § 41a 12% rate of interest unless it falls under a particular circumstance provided in § 41a
Virginia § 6.2-301 &{' '} § 6.2-303 6% legal rate 12% with a contract
Washington § 19.52.020 12% maximum interest rate, or 4% over the average bill-rate for 26- week treasury bills in the month the loan took effect
Washington D.C. § Title 29, Chapter 33 24% maximum interest rate for written contracts 6% maximum interest rate for verbal contracts
West Virginia § 47-6-5 6% legal interest rate 8% maximum interest rate for written agreements
Wisconsin § 138.04 5% legal interest rate Interest rates in written agreements can be agreed upon
Wyoming § 40-14-106 7% interest rate Interest rates in written agreements can be agreed upon

How to Sign a Promissory Note

Once you have written a custom Promissory Note, you’ll need to sign it along with the other party so that it can be considered legally valid.  

To ensure that you sign your legal document correctly, you must complete the following steps

  1. Review if you require witnesses: In general, you won’t need any witness testimonies. However, certain jurisdictions have witness requirements or require that a notary public witnesses the signing. 

  2. Fill in the date: If you haven’t done so already, ensure the date is filled in at the moment of signing. 

  3. Sign the document: Both you and the other party must then sign the Note, along with your printed names. 

  4. Provide copies: Both you and the other party should receive and keep copies of the Promissory Note. 

Before signing the Promissory Note, or any legal document, ensure you review and follow all the requirements of the state’s laws that you are signing your Note in.

What to Do if the Borrower Defaults

It is essential to be prepared in the event that the borrower defaults on the loan, in other words, they miss a payment and will not pay or cannot pay the installments. 

The situation must be handled carefully to try to find a solution that will give you the least amount of trouble

If the borrower defaults on the loan, you should: 

  • Have a conversation with the borrower to understand what the problem is regarding the loan repayment. 

  • Provide the borrower with a copy to review the agreed upon terms 

  • Send a Demand for Money Owed letter to them by certified mail if the borrower doesn’t comply. 

  • Collect all the evidence of your loan and any conversations you’ve had with the borrower. 

  • Think about using a debt settlement agreement to recover any losses. 

If none of these options work, you may then need to consider suing the borrower in court to recover the money you’ve lent them.

Release of Promissory Note

Once the principal amount that was loaned is fully repaid and any interest owed is covered by the debtor to the creditor, the loan can be formally released. For this to happen, a promissory note release form can be completed and given to the borrower.

This form provides a formal receipt and shows that the original promise within the promissory note has been fulfilled. From this point onwards, the borrower is no longer under any obligation to the original debt note.

Sample Promissory Note

When writing a promissory note for the first time it can often help to see a real example first to get a feel for structuring and completing your own. Check our Promissory note template example document below to get a better idea of how your final document should turn out.

Promissory Note FAQs

It’s important to be fully clear on what your promissory note should contain and cover before starting your own document. If you’re still unsure of some of these details, read through our FAQs below to learn more about their uses and essential inclusion.

What is Included in a Promissory Note?

A promissory note briefly summarizes the key points of a promise to pay a sum of money. This includes details such as how much money is being lent, who the lender and borrower are, when the loan must be repaid, how much is being charged, and whether any collateral will secure the loan, etc.

Do I Need Witnesses to Sign the Promissory Note?

It isn’t necessary or obligatory to have the signing of your promissory note witnessed. However, this can be a requirement for some lenders before they agree to extend a loan.

This is because witnessing usually adds more legitimacy to the signing of your debt note. It ensures that all parties are fully aware of what they are signing and that they agree fully to the terms of the contract. 

Does a Promissory Note Need to be Notarized?

No, promissory notes do not require notarized signatures. However, a lender or borrower can still choose to do this to add extra security and certainty to the signed document and ensure that it has the maximum legal enforceability possible. 

What Makes a Promissory Note Invalid?

Like most signed agreements and contracts, promissory notes must follow state and federal financial and legal regulations or they may be determined to be invalid. Breaching usury laws, losing all copies of the note, including false or incorrect information, and being unable to prove legal ownership of the debt could nullify your agreement.

Where Can I Get a Promissory Note Template?

It is possible to create your very own promissory note online using our expert template designer and step-by-step guidance. Our pre-prepared layout can be easily filled in using your own information in less than half an hour, which can then be used to create a quick and binding agreement with someone who will owe you money. 

Alternatively, you can pay an attorney to draw up this document for you before issuing your loan. 

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