Secured Promissory Note - Unsecured Promissory Note - Demand Promissory Note - Balloon Promissory Note - Usury Promissory Note - When you need a Promissory Note?
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Who is a Promisor and Promisee? Who is a Maker and a Payee? What is a default on a Promissory Note? When you need a Promissory Note? What does 'Promise' mean? Who is a note holder? |
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1. When do you need a Promissory Note?
2. What is a Secured Promissory Note? 3. What is an Unsecured Promissory Note? 4. What is a Demand Promissory Note? 5. What is a Balloon Promissory Note? 6. Usury Promissory Note 7. What does "Promise" mean? 8. Who is a the Note Holder? 9. Who are the Promisor and Promisee? Who are the Maker and Payee? 10. Do I have to charge interest on the Promissory Note? 11. What is a default on a Promissory Note? 12. How do I notify a Borrower that he defaulted on the Promissory Note? When do you need a Promissory Note? You need a promissory note when you want to document a loan to a family member, a friend, or any third party.What is a Secured Promissory Note? It's the same as a Collateral Note. This is a Note secured by collateral. A typical example of a secured Promissory Note is a mortgage loan.If you do not take collateral and the Borrower defaults on the note, you will have to take the Borrower to court in order to recover your money; and your judgment can only be enforced against certain assets of the Borrower. However, if you take collateral for the note, you may be entitled to seize and sell the collateral if the Borrower fails to repay the note. What is an Unsecured Promissory Note? A Promissory Note is a written promise to pay a debt by a certain date.It establishes terms of repayment and the penalty for breaking the promise to pay. It is not secured by collateral, meaning that if a Borrower refuses to pay the debt you have to sue him for the amount owed. What is a Demand Promissory Note? A Demand Promissory Note is an agreement between two parties in which one party, a Borrower, takes a loan from the other party, a Lender, and makes an unconditional promise to pay this loan upon demand of the Lender.There is no fixed end date for the repayment of the note. What is a Balloon Promissory Note? A Balloon Note is a Promissory Note that has one large payment (the balloon payment) that is due upon maturity. A balloon note will often have the advantage of a very low interest rate, thus requiring little capital outlay during the life of the loan.The major problem with such a loan is that the borrower needs to be self-disciplined in preparing for the large balloon payment due when the loan matures. Of course refinancing the note upon maturity is always a possibility. A Usury Promissory note charges an interest rate that is higher than the maximum allowed rate for the State. "Promise," as it is defined in the Uniform Commercial Code, means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation. A Note Holder is a person who is entitled to receive payment on the Promissory Note. This person may differ from the initial lender if a note was transferred to a new Note Holder. Who are the Promisor and Promisee? Who are the Maker and Payee? The promisor is the person who promises to pay the debt. The Promisee is the person to whom the debt is owed.The Maker is the person who is taking a loan, the same as the Promisor. The Payee is the debtor, i.e. the person to whom the debt is owed. Obligor = promisor Obligee = promisee Do I have to charge interest on the Promissory Note? No, a Promisee does not have to charge interest on the Promissory note.What is a default on a Promissory Note? If the Borrower did not pay his monthly payment in full by the designated date, he is in default.How do you notify a Borrower that he defaulted on the Promissory Note? A Lender may send a Letter of Default on Promissory Note to the Borrower notifying him that if he does not pay the overdue amount by a certain date, the Note Holder may require him to immediately pay the full amount of principal that has not been paid. |
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