A promissory note form is a legal written promise to repay a loan or debt under specific terms. This is usually upon demand or at a stated time, through specified number of installments. The pros and cons of writing a promissory note versus buying a professionally drafted attorney prepared promissory note online for less than ten dollars.

How to write a Promissory Note and pitfalls to avoid?

Any promissory note should have the following basic clauses. The lender and buyer may elect to omit some optional clauses.

1. The borrower agrees to pay the lender a specific sum. The lender and borrower may also include a rate of interest per annum if both agree.
2. A terms of payment clause specifying that payments shall be first applied to the interest and then to the principal.
3. An optional clause is payable on demand. This clause allows the lender to ask for payment on demand and the owning balance is due immediately.
4. Another optional clause is the late fees clause. In the event the borrower fails to remit payment on a specified date, a late fee penalty is added to the loan either as a specified dollar amount or a percent of the missed payment amount.
5. A prepayment clause if included allows the borrower to remit payment in full at any time without incurring any penalty.
6. A must include clause is the default clause. This clause specifies that in case of a default that the borrower(s) agree to pay all costs and expenses incurred by the Lender, including all reasonable attorney fees (including both hourly and contingent attorney fees as permitted by law) for the collection of this Note upon default, and including reasonable collection charges (including, where consistent with industry practices, a collection charge set as a percentage of the outstanding balance of this Note) should collection be referred to a collection agency.

These are the basic clauses to include. An attorney prepared note is more comprehensive and offers total legal protection.

What are the pitfalls to avoid?

A written note or a free note downloaded from the interest is almost always guaranteed to be incomplete and to contain errors. Nobody when loaning somebody expects the borrower to default especially when loaning family and close friends, but reality in life is that many do. A handwritten or a typed note is often unenforceable in court and results in trusting lenders losing their money.