TYPES OF PROMISSORY/IOU NOTES:
Personal: generally used in loans between family and friends. IMPORTANT INFORMATION TO INCLUDE IN THE IOU NOTE:
Commercial: used by financial institutions, commercial lenders, banks.
Real Estate: used when a lien would be placed (home, commercial property).
Investments: generally used to raise business capital, it has legal value and can be traded. Recovering damages and returns on investments are usually expected.
TYPES OF PROMISSORY/IOU NOTES:
Personal: generally used in loans between family and friends.
IMPORTANT INFORMATION TO INCLUDE IN THE IOU NOTE:
A debt, tax or legal counsel should be consulted before signing any legal document to be used in a consumer credit transaction.
It is always a good idea having a local attorney review your note to make sure it complies with state laws and can be held valid by a court of law.
This SAMPLE PROMISSORY/IOU NOTE is a simple template that can be modified to fit your specific needs. This document is Copyrighted and is intended for personal use ONLY.
Principal amount: $____________________ DATE, _____/_____/_____
FOR VALUE RECEIVED, I, ___________________________________ (Borrower) promise to pay _______________________________ ___ (Lender) the sum of _____________________________ Dollars ($_______________), and interest at the yearly rate of _____% on the unpaid balance as specified below.
Repayment shall be made in __________ weekly/monthly installments, consisting of $______per installment on the ____ day of each week/month and continue through for ______ week/months, or until the principal is paid in full.
OR, Borrower will pay one lump payment in lawful money of the United States on: _____/_____/_____.
If the Borrower fails to make an installment payment when due or fails to comply with any other term of this promissory note, the loan will be considered in default. A late penalty charge of __________________ Dollars per (month/day) will be assessed until the account is brought current inclusive of the late charges, interest and applicable fees.
Borrower agrees that until the principal and interest owed under this note are paid in full, this note will be secured by the _______________________________ (describe property, such as a car or a house.)
Payments will be applied first to interest and then to principal.
This note may be prepaid by the Borrower at any time in whole or in part without premium or penalty.
In the event of the Borrower's death, the unpaid indebtedness remaining on the note shall be canceled.
The Borrower must promptly inform the Lender of any change in name or address.
If the Lender prevails in a lawsuit to collect on this note, Borrower will pay Lender's court costs, collection agency costs, and attorney's fees in an amount the court finds to be reasonable.
IN WITNESS WHEREOF, I set my hand under seal this ____th day of _______________, 20___ and I acknowledge receipt of a completed copy of this instrument.
Permanent Address: _____________________________________________________
Social Security Number: ______________________________
Driver's Licence Number: ______________________________
Notary Public - SEAL
My Commission Expires ______/______/______
In some cases, these additional information are requested:
A promissory note is a legal instrument that can be legally biding and enforceable by a court of law if certain conditions are present, such as:
When signed and agreed upon, the lender has legal authority to seek collection or restitution against the borrower for the amount of money loaned, plus interest and legal expenses in most cases. By signing a note, the borrower agrees to repay the loan that is guaranteed using the note, but it is not an assurance that the lender you will get his money back.
It is used for simple loan transactions and effective as long as both parties fully understand what they are getting into. Make sure any document you find online complies with your state's laws prior to executing it for business or personal use. If your case involves more complex issues, the assistance of a licensed legal professional is recommended before drafting and signing anything.
Enforcing a SECURED PROMISSORY/IOU NOTE can be accomplished by taking possession of the secured item, or hiring a re-possession company to do that for you.
The enforcement of an UNSECURED PROMISSORY/IOU NOTE is more complicated for being only a breach of contract on a promise to pay.
First, take legal action by filing a petition in a court of law and get a judgement in your favor.
Then, hire a collection services agency and initiate repossession proceedings against the borrower.
If it fails, you can also seek to garnish the person’s wages.
If all fail, try selling the note to a specialized company which will then attempt to collect the transferred debt.
These laws define the maximum interest rate you are allowed to charge.
Violating usury laws can have serious civil and sometimes criminal consequences.
Also, your state may have limits which apply to the amount you can charge for late fees.