Eight Steps to Writing a Binding Promissory Note

Kristie Lorette reports:

"Whether your business is loaning money to someone or you are personally loaning money, when you write a binding promissory note, it is a legal contract between the lender and the borrower. Promissory notes are commonly written by banks, lenders and attorneys, but a promissory note written properly can be just as legal when entered into by two individuals...Write the date of the writing of the promissory note at the top of the page...Write the amount of the note. Add the amount of the loan, written in numeric value and long form (written out in words), similar to how you would write a check...Describe the note terms. Write out a description saying how the borrower is to repay the loan, such as with weekly, monthly or quarterly payments. Give the date the first payment is due by writing out the month, day and year. State the day and the months that subsequent loan payments are due as well. Finally, indicate the last day and month of the final payment on the note...Write the interest rate. Describe the interest rate of the loan in a numeric value with a percent sign and in long form. State if the interest rate is a fixed or variable rate...State if the note is secured or unsecured. If the borrower is using collateral to secure the loan, describe this on the promissory note...Include the names of both the lender and the borrower on the note, indicating which person is which...Write the complete mailing address where each payment is to be mailed...Each borrower should print and sign his name, as well as date the promissory note, to acknowledge the obligation to repay the loan...If there is more than one borrower, make sure each borrower prints, signs and dates the promissory note. Otherwise, if legal action is necessary, you can pursue it only with the borrower who signs the promissory note. The lender is not required to sign the promissory note for it to be legally binding."