A promissory note is a written promise to pay money to someone. Its primary function is to serve as written evidence of the amount of a debt and the terms under which it will be repaid, including the rate of interest. This helps both the lender and borrower know exactly what the expectations and plans for repayment are.
This promissory note allows for repayment in amortized installments with interest.
Important to Know:
- Typically, interest charged on loans between friends and family runs five to 10 percent. If you wish to charge more, check your state laws to make sure the rate is legal.
- Charging interest adds a level of complexity when it comes to figuring out the monthly payments and early payoff. Use an online amortization calculator (see instructions) to do this.
- If the lender and borrower decide to change the terms of a promissory note, use "Agreement to Modify Promissory Note."
- If the borrower does not repay you according to the terms of your promissory note, considering using "Demand for Overdue Repayment on Promissory Note."
