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What Exactly Is a Promissory Note? |
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What Exactly Is a Promissory Note?Author: Nicholas Copernicus A promissory note is a legal agreement that is a written promise to repay a debt. It will include how and when the debt will be repaid. It can be through a series of payments, upon demand, or another way both parties can agree upon.
A promissory note will require the full names of the parties, the amount of the obligation, and the debtor's obligation(s). The debtor's obligation includes the terms of repayment, and an interest rate, if any. It can also include what is called an 'acceleration clause'. An acceleration clause will make the entire amount of the note due if just a single payment is late.
When creating a promissory note one should always know their state's 'usury' laws. These laws define the maximum interest rate some one can charge. Most state's charge fees and fines for people who violate usury laws. Other states carry criminal penalties for violators.
Also, when you're creating a promissory note form you need to know a few legal terms. One legal term you want know is 'Promisor'. A promisor is the person who promises to repay the debt or other obligation secured by the note. Another term is 'Promisee'. A promisee is a person who is to receive payment on the debt or obligation secured by the note. Another term is 'Obligor'. An obligor is another word for 'promisor'. Yet another term you need to know is Obligee. An obligee is another word for 'promisee'. The final term you need to know is 'Consideration'. Consideration is a legal term for the value received by both parties in return for entering into the contract. So the 'mutual consideration' would be that the promisor receives the loan, and the promisee receives repayment as specified in the note.
Once you've gotten those legal terms down then it should be quite easy to create your own promissory note. You can pay a print fee at your local courthouse for a copy, but for people in my state and probably most state's, it's much cheaper to just download a copy online.
Disclaimer: This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as legal advice or used to make legal decisions. Consult an attorney in your area if you're seeking legal advice.
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