Define Promissory Note?

Define Promissory Note?

A promissory note template, in the simplest sense, is a written statement which includes a person’s promise of paying a specified amount of money to a particular person or organization either on a set date or on demand.

A promissory note is used as a financial tool which is typically issued by a certain financial institution upon granting an individual’s loan application. A promissory note template is often regarded as an agreement which carries the agreed-upon terms by both the lender and the borrower.

Essential Elements of a Promissory Note

A promissory note has to have specific elements in order for it to be considered valid. Here are some elements a promissory note must contain:

  • Written statement in pdf.
  • Promise of payment on a specified date or on demand without any condition stated. In most cases, a document cannot be considered a promissory not if its statement of promise also states conditions.
  • Signature of both the lender and borrower.
  • Certainty of the lender or debtor (also known as maker).
  • Accurate amount of debt or money to be paid.
  • Statement specifying the currency to be used in paying the debt.
  • Terms and conditions regarding the payment.

Such elements or contents may differ depending on the financial institution and/or the laws on promissory notes in their area. Some may add a few contents to blank note example which are not listed above.

Difference between a Mortgage and a Promissory Note

A mortgage and a promissory note sample are fundamental documents included in an individual’s loan. They are usually confused with each other, as they have almost the same purpose. Thus, it is time we distinguish the difference between the two documents to avoid confusion in the future.

Promissory Note

A promissory note, as discussed, is a note containing a written promise of the debtor. It contains details of the loan including the amount to be payed, terms of payment, deadline for payment, interest rate, and other important details concerning the current loan note. Of course, both the lender and the borrower have to follow all the terms stated in the promissory note to avoid conflict and legal actions.

Mortgage Note

A mortgage note is a document issued in the case of a property loan (e.g. home loan). A mortgage note serves as a document which secures the loan by holding the property (financed by the loaned money) as collateral. In the instance of loan default (i.e. if the borrower stops paying the debt indefinitely), the lender can accelerate the loan (or ask the debtor to immediately pay the loan in full), or claim the property and sell it to cover the amount left to be paid. By the way, a mortgage is a type of promissory note. And like a promissory note, it also contains the details of the loan including the personal details of the borrower.

Both documents serve as a record of the loan credit note, and an agreement of both the lender and borrower, containing conditions and terms regarding the loan and the payment. Still, both are entirely different from each other, which I hope I made clear.