The Features And Use Of A Loan Promissory Note

March 22, 2012 · Posted in Leasing · Comment 

A loan promissory note is a legal binding document which is in black and white made by one party to another signed by the issuer. Its main purpose is to engage a payment when demanded or at a fixed time. These debts are usually given to friends or family members.

There are certain features, which must be contained in the document. For example, the amount of money, the interest rate and the time the money is to be repaid. The other issue which should be included, is the mode of payment. For example, it can be weekly, daily or monthly.

The time of payment should also be indicated if it is not to be payable on demand. There are legal terminologies involved when entering into this contract. To start with the promissory is the person who borrows money and makes a promise to repay. The promise is the person to whom a promise is made on when he or she will be refunded the cash.

In any legally binding contract there has to be a consideration. In this case, the consideration to the promisee is the document and the promise that the money will be returned. To the promisor the consideration is the amount of debt he or she will receive.

The other issue is the usury which is an illegal deed. This is hiking of the interest rate or the late fees beyond what is allowed by law. This is usually treated as a criminal offence in most states. It is advisable to check what the laws provide as the maximum interest rate. The interest rate differs from state to state, but it usually ranges between twenty to thirty percent.

Loan promissory notes are very risky especially when they are unsecured. The promisee should only give the loan to a person that is trustworthy. The document becomes unenforceable if it does not have all the vital features.

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Why A Loan Promissory Note Is A Good Idea

January 12, 2012 · Posted in Leasing · Comment 

Anytime a loan is made, whether it be a personal one between friends or from a bank, a loan promissory note should accompany it. This document exists to guarantee that all parties involved understand the terms of the agreement and agree to them. This can also be a good protection if there are any disputes about the agreement or repayment terms.

The details of the loan should be present in the document. The lending terms about interest, repayment schedules, the amount, and the date of creation are details that should be clarified. If you are creating this document on your own there are plenty of templates online.

Even though you are lending to a friend it is still a good idea to charge some interest. You do not need to do this in hopes of earning a profit but should instead seek to ensure that you are not taking on more of a burden by lending. The interest should be compensation for the lack of funds you will have for other uses once you lend some out.

A loan from a bank will include a more complex version of this document that one you may create yourself. However, the terms and intent of it will be the same. Lending is a risk and all parties should feel more confident knowing that the details are settled.

One of the biggest lenders is the federal government. Any student who receives federal student aid must sign a master promissory note, which covers any loans made to them from the government. This document is similar to the basic form but it can cover multiple loans.

Creating a promissory note can be quite simple, based on your needs. It is not always necessary to consult a lawyer, especially if the amount lent is relatively small. Save yourself time and trouble by finding a sample or blank form to fill in with the terms of your agreement to make sure everyone is protected in the transaction.

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