Promissory Note - Guide and Sample

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Promissory Note - Guide and Sample Powered By Docstoc
					This is a guide that provides information about promissory notes as well as including a
sample promissory note agreement. The guide sets forth general information about
promissory notes, provides a checklist, and includes step-by-step instructions. Under
the sample promissory note, the borrower provides additional security for the repayment
of the loan by providing the lender with a security interest in certain assets. Additionally,
the note becomes immediately due at the election of the lender. This document should
be used by individuals or entities that want to learn more about promissory notes or
want to enter into a loan agreement using certain assets as security for the repayment
of the loan.
Table of Contents


General Information ........................................................................................................................ 3

Checklist ......................................................................................................................................... 4

Step-by-Step Instructions ................................................................................................................ 4

Disclaimer ....................................................................................Error! Bookmark not defined.8




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                                      General Information

       Any time you loan or borrow money, it is always best to use a Promissory Note.
Documenting the loan will not only ensure that the parties are clear on the transaction, but will
avoid any misunderstandings later. A Promissory Note is a fairly straightforward document that
sets forth repayment terms when you borrow money.


       This note is a secured Promissory Note. In a secured note, the borrower has pledged an
asset as collateral for the loan. This is preferable for the Lender, because if the borrower ever
becomes insolvent or files for bankruptcy, the Lender will have claim to the asset that has been
pledged.


       In the form you will need to determine the interest rate of the loan. There are two types
of interest rates, either fixed or variable. A fixed interest rate remains the same during the life
the loan and does not change. A variable interest rate is tied to the market and will go up and
down based on what is happening in the marketplace.


       There are various ways to repay a loan, installment payments, lump sum, balloon
payments, interest only or a combination of these. Installment payments are the most common,
where the borrower will pay a set sum every month and a portion will go to principal and a
portion to interest. A lump sum payment would be paying down the balance in full at the end of
the loan period. This is similar to a balloon payment, where a borrower might make payments
for a time, and then a large payment will be due. Interest only is where they borrower pays the
interest every month, but makes no payment towards the principal.




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                                             Checklist



      Borrower and Lender should review the document thoroughly and make sure they
       understand the terms.


      The parties shoul
				
DOCUMENT INFO
Description: This is a guide that provides information about promissory notes as well as including a sample promissory note agreement. The guide sets forth general information about promissory notes, provides a checklist, and includes step-by-step instructions. Under the sample promissory note, the borrower provides additional security for the repayment of the loan by providing the lender with a security interest in certain assets. Additionally, the note becomes immediately due at the election of the lender. This document should be used by individuals or entities that want to learn more about promissory notes or want to enter into a loan agreement using certain assets as security for the repayment of the loan.
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