When you are lending out money, it is critical that you have proper legal coverage in the event of a default. This holds true whether you are dealing with acquaintances, coworkers, friends or even family members. Whenever you lend or borrow a loan, you will want to have a written agreement that is signed and notarized. The sample promissory note outlined below highlights the modes and methods of payment, and the rules and regulations that are to be followed. The promissory note also contains information on what would happen in case of a default of payment.
Sample Promissory Note
Principal Amount: $________________ (insert amount being loaned)
Date: ___________(insert date at the time of the contract being made)
For the value received of the amount stated above I, ________________ (Insert Name of Borrower) promise to repay Mr./Ms. ________________ (Insert Name of Lender) the total sum of $________________ (Insert amount), as well as interest, which has been set at the yearly rate of _______(Insert percentage of interest agreed) %.
I agree and state that the repayments of the amount borrowed will be made in monthly payments over a period of_______ (insert number of months the payment will span for) months. Each payment will be of an amount of $________________ (insert amount to be paid monthly) on the 1st day of each month. The payment will start at the date_________ (Insert date of the first payment month) and the final payment of the repayment of the loan will be due on _________(Insert date of the last payment month) or until the principal amount that was lent is paid back in full.
A default loan is the result of any event in which the borrower fails to make the proper payment in accordance to the signed promissory note. If the borrower defaults on his or her loan, the lender is allowed to pursue legal action. In any such case, it is the job of the borrower to contact the lender at the earliest available opportunity and make arrangements with him/her to bring the loan to terms under the compliance of this promissory note. The borrower is expected to make any and all efforts in their power to make the payments on the time that is agreed upon in this promissory note and to religiously comply with each and every term of this note.
(If there is collateral involved in this loan, only then are you requested to include this paragraph in the note). The borrower pledges ___________ (Insert the name of the thing pledges as a security) to be owned by ___________ (insert name of the owner of the thing) as a security for the note that is payable. The title to the collateral will be transferred to the lender in case of a loan payment default. Any proceeds that come after the sale of the collateral will be the property of the Lender until and unless the Note in paid back to the lender in full.
The note may also be repaid by the Borrower at any time fully subject to it being the exact amount borrowed without any penalties or premiums. If the payments prior to the loan are high enough the loan may be re-amortized. In case of any change of number of address, the lender needs to be promptly informed by the borrower.
Borrowers Printed Name: _________________________
Borrower’s Signature: ___________________________
Address of the Borrower: ________________________________________________________________
Borrower’s Number: ________________________
Borrower’s Email: __________________________
Lenders Printed Name: _______________________
Lender’s Signature: _________________________
Address of the Lender: ________________________________________________________________
Lender’s Number: ____________________
Lender’s Email: ______________________
Witness Name: ______________________
Witness Signature: ____________________