A promissory note template is actually a legal document which outlines comprehensive details pertaining to a loan. It is basically a part of a business transaction, where one party agreed on some terms and conditions with promise to pay on a specific future date. A promissory note defines loan amount agreed by all parties along with repayment task schedule and any facilitation cost due to non-compliance of terms of this legal binding agreement by any party. It is, indeed, a promise made by a borrower, either due to compliance or as required by a lender, to pay the loan amount in full or in equal installments. It ensures smooth completion of a business transaction and helps parties to trust each others.
Significance of Promissory Note
A promissory note is a revolutionary tool which ensures businesses to progress and expend. To safeguard the interests of all parties, it plays the role of a bridge which removes gap among parties and assists them to complete the transaction successfully. Perhaps, this note is can be used to submit application for obtaining credit amount or a line of credit from organization or financial institution to meet the working capital requirements. Nevertheless, before entering into any business transaction where you are unaware of the credit history of your client, it would be better to ask for a promissory note before lending any amount. It is a good idea of using a promissory note where you wish to get back loan amount quickly.
Details of Promissory Note
A promissory note, in simple words; is a legal protection which ensures repayment of a loan as well as completion of a business transaction. The role of this note is to clarify the terms of a business transaction, amount borrowed, consideration and commitment of repayment of loan. It may also include special clauses which will make the entire loan amount due, if a single or few installment payments are missed. You need to be very careful while drafting a promissory note, keeping country or state’s laws in consideration to ensure legality of note. A promissory note template is very effective template to have an idea about the format of promissory note. However, the interest rate will be used in the promissory note as per current prevailing rates.
Content of a Promissory Note
If you are signing a promissory note for the first time, then you will need to understand its legal worth as well as terms which are associated with it. However, if you need information about a promissory note, then you can understand its content and segments which are given in details underneath;
Promisor: The role of a “promisor” is to make a promise to repay the borrowed amount, following the terms imposed by a promissory note.
Promisee: The role of a “promisee” is to whom promise is made. He/she is a person or institute who is entitled to receive repayments of loan along with interest payments with mutually agreed interest rate.
Obligor: An “obliger” is a person who is the real beneficial of borrowed loan. The obligor can be the person who actually making repayments, but it is not the case of all transactions. A “promisor” can also make repayments on behalf of obligor.
Obligee: The “Obligee” is another word used for “promisee” while discussing a promissory note. An obnligee is a person to whom promise is being made.
Consideration: The “consideration” is actually the borrowed money for promisor whereas; the interest amount will be the consideration of “promisee”. In order to make a legal transaction, a lawful consideration is inevitable to make a contract. All parties, involved in this agreement, must receive some sort of “consideration” in return.
