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Promissory Note

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Promissory Note

The Borrower and the Lender is referred to individually as “Party” and collectively as the “Parties”

This Agreement (the “Promissory Note”) is entered into and made valid upon signature by both Parties (the “Effective Date”)


The Lender agrees to a loan to the Borrower for the sum of [Insert Amount of money as loan], (the "Principal Sum") with interest at the rate of [Insert interest rate denoting a percentage] per annum (the "Interest") on the unpaid principal in accordance with the terms and conditions set forth below:


1. Terms of repayment:

  1. General Repayment: The Principal Sum plus all accrued interest will be paid back in full on [Insert date on which the amount is to be paid back] ("Due Date"). The Parties, between them, shall agree upon a payment method and structure, but the Borrower shall ensure that the entirety of the Principal Sum and all interest will be returned by the Due Date.
  2. Past Due Interest: If the Due Date passes and the entirety of the Principal Sum with accrued interest has not been paid back, a higher interest rate of [Insert higher rate of interest denoting a percentage] per annum on the unpaid amount will be charged until all the funds owing are recouped in full.

2. Default:

The following events constitute default of this Promissory Note and upon their occurrence, the entirety of any remaining amount due shall become immediately payable:

  1. Borrower's insolvency;
  2. Borrower's death, incompetency; liquidation, or dissolution;
  3. Borrower's making of a general assignment for the benefit of Borrower's creditors;
  4. Borrower's filing of any bankruptcy proceedings; or
  5. Any application for the appointment of a receiver for Borrower.

3. Collection costs:

Should the Borrower default on completing any obligation contained within this Promissory Note, including, but not limited to, if any of the circumstances in the Default provision occur, the Lender may declare the entire amount remaining due immediately. Any and all costs or expenses incurred by the Lender in enforcing the obligations of this Promissory Note as a result of the Borrower’s default, including any legal fees or costs, will be added to the remaining amount due and must be paid immediately by the Borrower.

4. General Provisions: 

  1. GOVERNING LAW: This Promissory Note shall be governed in all respects by the laws of the state of [Insert name of the state] and any applicable federal law. Borrower consents to jurisdiction under the state and federal courts within the state of [Insert name of the state]. Borrower agrees that this choice of law, venue, and jurisdiction provision is not permissive, but rather mandatory in nature.
  1. AMENDMENTS: This Promissory Note may only be amended in writing signed by both Parties.
  2. ASSIGNMENT: This Promissory Note, or the rights granted hereunder, may not be assigned, sold, leased or otherwise transferred in whole or part by the Borrower.
  1. NOTICE: Notice shall be given to either Party at the addresses listed at the top of this document, through certified mail, return receipt requested or at the following email addresses. Notice is deemed given when sent:

Borrower: [Insert e-mail address of the borrower]

Lender: [Insert e-mail address of the lender]

5. Binding:

This Promissory Note will inure to the benefit of and be binding upon the respective successors, assigns, heirs, executors and/or administrators of the Borrower.

6. Headings:

Headings to this Promissory Note are for convenience only and shall not be construed to limit or otherwise affect the terms of this Promissory Note.

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A Promissory Note, also sometimes called an IOU "I owe you", is essentially a one-sided document by which a borrower of money agrees to pay a lender.

A Promissory Note is different than a loan agreement because it only binds one party, the Borrower, to actions (such as payment) or consequences (such as if the Borrower doesn't pay), but it doesn't bind the lender to anything. In fact, lenders don't even sign Promissory Notes - only borrowers do.

Often, Promissory Notes are used in place of more formal loan agreements when the loan is being made informally between friends or family members. Promissory Notes can even sometimes be used between very small businesses.

How to use this document: This document can be used in any situation where an individual or business is borrowing money from another individual or business but is best used in situations where money is being loaned somewhat informally, between family and friends. This is because the Promissory Note is only signed by one party, the Borrower, and it does not bind both parties to an agreement.

In this document, the basic details of the loan will be entered, such as the amount and when the total amount is due. It also includes, of course, the identifying details of both parties: the name and address of the individual borrower and lender, or the business name and business address of a company borrower or lender.

This Promissory Note will also include a determination of the biggest issue with the loan - whether or not interest will be charged.

A Promissory Note is a short, succinct document for a loan.

Applicable Law: Promissory Notes are governed by Article III of the Uniform Commercial Code (the "UCC") [For US Law].

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