Promissory Note

What this document is

A promissory note is a borrower's written promise to pay a specific sum of money, either on a fixed date or on demand, sometimes with interest. Unlike a loan agreement, which sets out the mutual terms of both parties, a promissory note is essentially one-directional: it is the borrower committing, in writing and with a signature, to repay. That simplicity is its appeal.

People reach for a promissory note when the loan is straightforward and they want proof of the debt without negotiating a full contract. It records the amount, the repayment date or schedule, any interest, and the borrower's signature — enough to show that money was owed and promised back.

When to use it

• You are lending a fixed amount and want a simple signed promise to repay.
• The terms are basic — an amount, a date, maybe interest — and a full agreement feels like overkill.
• You want the borrower's clear, signed commitment as evidence of the debt.
• A repayment is being restructured and you want the borrower to re-commit to the balance in writing.

When not to use it

• The loan is large or complex, with collateral, guarantors, or detailed default terms — use a full loan agreement.
• Both sides need mutual obligations recorded, not just the borrower's promise.
• The debt already exists and you want the debtor to acknowledge it with a repayment plan — a debt acknowledgment fits better.
• Local rules for the amount involved may require specific formalities — check for larger sums.

Information you will need

• Full names of the borrower (maker) and the lender (payee)
• The exact principal amount and currency
• Whether repayment is on a fixed date, in installments, or on demand
• Any interest rate and how it is calculated
• The date and place the note is signed
• How payment will be made and to which account
• The borrower's signature

Clauses included

How to sign it

A promissory note is signed by the borrower — that signature is the promise. The lender does not always sign, since the note records the borrower's commitment rather than a mutual bargain. Keep the signed original safe; it is your primary evidence of the debt.

For larger amounts, having the signature witnessed adds weight, and keeping proof that the money was actually handed over (a transfer record or receipt) turns the promise into a complete story.

Common mistakes

• Leaving the repayment date or terms vague, so it is unclear when the money is due.
• Not recording that the funds were actually transferred, so the borrower can claim the money never arrived.
• Setting interest without stating how it is calculated.
• Losing the signed original and relying on a photo alone.
• Using a bare note for a large loan that really needs a full agreement.

Frequently asked questions