Promissory Note Templates, Free Promissory Note Form Samples

Key Takeaways

A promissory note is a legally-binding document that ensures a lender will receive the borrowed money. They are used in significant financial transactions like mortgages, car loans, student loans, and business loans.
By type, promissory notes can be either secured or unsecured, with secured notes requiring collateral and unsecured notes relying on the borrower’s creditworthiness.
Promissory notes generally follow consistent principles across states. However, there may be some variations in state-specific requirements.
When writing a promissory note template, key elements include names and contact details of parties, loan amount, repayment date and terms, interest rate, final amount, collateral (if applicable), default terms, and signatures.
Using promissory note templates by PandaDoc ensures clarity and consistency in documenting the terms of a loan agreement, reducing the risk of misunderstandings or disputes between the borrower and lender.

A promissory note form (sometimes also called a loan agreement or IOU) is a legally-binding document whose purpose is to make sure a lender will receive the money (plus the interest) from the person or organization they have lent the money to. A typical promissory note example specifies the amount, frequency, payment schedule and deadline, as well as other information related to the agreement.

Promissory Notes by Type

Depending on the mentioning of some assets that safeguard the return of the borrowed money, promissory notes can be secured or unsecured.

Secured Promissory Note

Secured Promissory Note Template

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Complete our free secured promissory note template to create a legally binding promise to repay a loan.

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If it is the former, the borrower has to relinquish some collateral (goods, services, or property) if they fail to pay back the borrowed sum. To ensure fair repayment, the value of the provided collateral should be at least equal to the borrowed amount.

Unsecured Promissory Note

Unsecured Promissory Note Template

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This unsecured promissory note template lets you protect your investment if you loan money to a business, friend, or family member.

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An unsecured note doesn’t mention any collateral. The lender may agree to such a note if the borrower has a healthy credit score.

Family member Promissory Note

Family Member Promissory Note Template

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Easily document loans between relatives with our customizable Family Member Promissory Note Template.

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Use a family member promissory note template when formalizing financial agreements between relatives, providing a clear record of terms and expectations to maintain familial relationships and avoid misunderstandings.

According to the term of repayment, promissory notes may be due on a specific date or on demand. A template for simple promissory note of the first type contains a specific payback date when the lump sum (plus the interest) is to be returned to the lender. The second type of note is issued to control the return of open-ended loans, when the lender (giving a notice some time in advance) can demand the repayment of the debt at their convenience.

Also, the lender may want to receive the payback either as the entire sum in one go or agree to split the repayment into portions. The second occasion mostly occurs in case the money is used to buy big-ticket items (for instance, electronic devices, appliances, cars, or boats). It requires a promissory note of installment payments, conventionally on a monthly basis.

A variety of this note relying on the so-called balloon payment system is typically applied in mortgage loans.

by State

In the USA, there are no federal laws regulating the domain of promissory notes. This legal area is considered to be within the jurisdiction of states. State laws are pretty much similar in their form and content, so you can make use of standard printable promissory note templates available at PandaDoc. That said, we still recommend consulting local legislation because in some minor aspects (like whether the lender must sign the note or not), the states may differ.

When to Use a Promissory Note

A simple promissory note may come in handy when a person lends a certain sum of money to a friend or relative. But when it goes about big-time business or a large amount of cash changing hands, such documents are an absolute must. That is why it is a crucial element of deals involving mortgages, car loans, student loans, and a number of business loans in the realm of real estate, commerce, investment, etc.

Such high-level papers tend to be rather sophisticated forms that are often accompanied by other documents, such as a shareholder agreement, a security agreement, an asset purchase contract, or an NDA.

How to Write a Promissory Note Sample

Documents like that are meant to be legally enforceable, which is why the following elements of them are mission-critical.

Names of stakeholders. These should be the legal names (titles) of the parties involved in the transaction.
Contact details of the parties. Here, the addresses and phone numbers of the lender and borrower are mentioned.
Loan amount. This is the sum that is lent by one side and borrowed by the other.
Repayment date. The date on which the payment is due must be set out clearly (concerning both the whole sum and the installations – if such a payment option is agreed upon). On-demand promissory notes don’t have this item.
Rate of interest. It is mentioned if the borrower demands it and the lender agrees to be charged. Here also, the rate of interest (calculated on the basis of the annual percentage rate) is pointed out.
Final amount. This is the total sum to be paid by the borrower (the loan body plus the interest).
Collateral. It appears only in a secured promissory note. It is a list of goods and services with their value that is put as a guarantee on a loan.
Repayment terms. Alongside the very terms, this clause includes the stipulations related to late or missed payments.
Default terms. This part contains consequences that come into play if the borrower fails to repay the loan when it is due.
Signatures. The mandatory ones are the signatures of the borrower and a witness. An optional component (depending on the state) is the signature of the lender.

Like any other legally-binding paper involving financial considerations, a promissory note is a no-joke document whose creation should be entrusted to a vetted legal expert. If that sounds too expensive and time-consuming, there is a better alternative. On our site, you can find a free promissory note template that can be customized in no time to meet your particular requirements, printed out, and signed by the parties involved.

Interest Rate Caps limits

Some states impose limits on the maximum interest rate that can be charged on loans. These caps can vary significantly between states, so adjust the allowable interest rate in a promissory note template accordingly.

Alabama: No usury law; no statutory cap.
Alaska: Loans over $25,000 have no cap; under $25,000, max rate is 10.5%.
Arizona: No cap for loans over $1,000,000; under $1,000,000, max rate is 10% unless agreed otherwise.
Arkansas: Usury limit typically 5% above Federal Reserve rate; no limit for commercial loans.
California: Usury limit of 7% + Federal Reserve rate; personal loans capped at 10%.
Colorado: No cap for loans over $100,000; under $100,000, max rate is 45% per annum.
Connecticut: Usury limit of 12% per annum; exceptions may apply for certain financial institutions.
Delaware: Usury limit of 5% above Federal Reserve discount rate.
Florida: No usury limit for loans over $500,000; under $500,000, max rate is 18%.
Georgia: No usury limit for loans over $3,000; under $3,000, max rate is 5% per month.
Hawaii: Usury limit of 10% per annum.
Idaho: Usury limit of 12% per annum; exceptions may apply.
Illinois: Usury limit of 9% unless contract specifies otherwise.
Indiana: Usury limit of 8% per annum.
Kansas: Usury limit of 10% unless otherwise specified.
Kentucky: Usury limit of 8% unless otherwise specified.
Louisiana: Usury limit of 12% per annum.
Maine: Usury limit of 6% per annum unless otherwise specified.
Maryland: Usury limit of 6% per annum.
Massachusetts: Usury limit of 20% per annum.
Michigan: Usury limit of 7% per annum.
Minnesota: Usury limit of 8% per annum.
Mississippi: Usury limit of 10% unless otherwise specified.
Missouri: Usury limit of 9% per annum.
Montana: Usury limit of 15% per annum.
Nebraska: Usury limit of 16% per annum.
Nevada: Usury limit of 18% unless otherwise specified.
New Hampshire: Usury limit of 10% unless otherwise specified.
New Jersey: Usury limit of 6% unless otherwise specified.
New Mexico: Usury limit of 15% unless otherwise specified.
New York: Usury limit varies based on the amount and type of loan.
North Carolina: Usury limit of 8% unless otherwise specified.
North Dakota: Usury limit of 5.5% unless otherwise specified.
Ohio: Usury limit of 8% unless otherwise specified.
Oklahoma: Usury limit varies based on the amount and type of loan.
Oregon: Usury limit of 12% per annum unless otherwise specified.
Pennsylvania: Usury limit of 6% per annum unless otherwise specified.
Rhode Island: Usury limit of 21% unless otherwise specified.
South Carolina: Usury limit of 8.75% unless otherwise specified.
South Dakota: No usury limit for loans over $100,000; under $100,000, max rate is 15%.
Tennessee: Usury limit of 10% unless otherwise specified.
Texas: Usury limit of 10% unless otherwise specified.
Utah: Usury limit of 10% unless otherwise specified.
Vermont: Usury limit of 12% unless otherwise specified.
Virginia: Usury limit of 12% unless otherwise specified.
Washington: Usury limit of 12% unless otherwise specified.
West Virginia: Usury limit of 8% unless otherwise specified.
Wisconsin: Usury limit of 5% above the Federal Reserve discount rate unless otherwise specified.
Wyoming: Usury limit of 10% unless otherwise specified.

Minimize red tape and eliminate legal headaches with workmanlike loadable promissory templates by PandaDoc!

Mortgage Note Template

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Download this Mortgage Note Template to give the lender assurance that the borrower and other parties responsible for the debt will pay the remaining balance on the mortgage.

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FAQ

As the root of the word suggests, it is a certificate of an official and legally-binding promise. In it, a person or an organization makes a commitment to repay the money that they borrow from a lender on certain conditions. These typically include a specific date, interest on the loan, and the collateral pledged as a security of complete and timely return of the debt.

A promissory note becomes invalid when one of the following conditions is met: The note isn’t signed by at least one of the parties prescribed by the state law. Payment amount, interest rate, or schedule is missing. It contains unclear clauses or unreasonable terms. The statute of limitations (from 3 to 15 years) is expired. The original copy is lost. Some changes are introduced in the note without a new agreement.

The mandatory signatures under a promissory note are those of the borrower and a witness. As to the signature of the lender, the legislations in various states differ. In some of them, the lender isn’t obliged to do that since (s)he is under no commitment under the note. In others, the lender has to sign the note alongside the lender and the witness.

You can write a template from scratch each time you need it. But it is hardly a wise decision in terms of the time and effort you will have to spend. If you want to facilitate document creation and signing as well as avoid mistakes in a finance-related legally-binding form, it is better to download a free secured promissory note template by PandaDoc.