Why A Loan Promissory Note Is A Good Idea

January 12, 2012 · Posted in Leasing 

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.

Learn more here: loan promissory note


Leave a Reply

You must be logged in to post a comment.