At some point or another in your life, you’re likely going to come across the situation where you need a promissory note. A promissory note can be required in a variety of different situations, but if it’s your first time needing one, you may have no clue what it means or how to get one. Luckily for you, it’s not that difficult if you know where to look. Here is some information about what a promissory note is, and where to look to get one when you need it.
A promissory note is a written document that ties a person to doing or paying something, most typically in the shape of a loan. They lie somewhere between the informality of an IOU and the rigidity of a loan contract. A promissory note allows the lender to feel more comfortable with whatever it is they are giving, knowing that they have a promissory note as documentation of what they should get in return. Promissory notes help keep exchanges between parties a bit more safe on both ends because there is documentation as proof of the transaction.
What Are The Terms of Promissory Note?
If you are simply looking at a promissory note to get a better idea of what it includes, you are likely going to see some terminology that you may be unfamiliar with. For one, a promisor is the person who is requesting the loan. The person granting the loan is referred to as the promisee on the note. Lastly, you’ll also see something called consideration. Consideration is used to describe whatever is being exchanged between the two parties. It can be a monetary amount, or it can be something that is owed for a service. Any other information, such as interest rates or other rules applied should also be listed under the consideration part of the promissory note.
In many cases, there are no specific requirements for how a promissory note is supposed to look. As long as it has all of the relevant information, that being the promisor, promisee and consideration, then the appearance of the note itself is secondary.
When Should You Have A Promissory Note?
Any time you are exchanging something with a family member, friend or another 3rd party and you feel that the exchange is highly valued, a promissory note could help avoid any tricky circumstances that may come up in the future. A promissory note will keep all parties accountable for what they promised. After all, you don’t want to lose a friendship over a promise gone bad.
A promissory note may sound like something that is complicated or confusing when you first hear about it. But that couldn’t be further from the truth. Promissory notes are easy to draft, and yet they provide a very valuable piece of evidence in a multitude of situations.