Are you planning to loan money to either a person or a company? Is there a voice in the back of your head telling you that you should draft a written agreement? We strongly encourage you to listen to that voice. We will give you some pointers for drafting promissory notes.
Let’s begin by defining what a promissory note is. A promissory note is a legally binding written document. With a promissory note, one party promises to pay another party either a sum of money or installment payments in the future.
Typical Things to Include in a Promissory Note:
- The amount of money you are providing to the borrower.
- The rate of interest that the borrower will pay.
- The terms of repayment. You should specify whether repayment be in a lump sum or over a number of months or years.
- What happens if the promissory note repayment is delayed or not paid back? We recommend provisions for late fees and attorney fees.
In addition, we recommend you perform a credit check before you sign the promissory note. We also recommend that the borrower find a personal guarantor for the note. In the event that the original borrower cannot repay the promissory note, the guarantor would be liable for repayment, as well as late fees and attorney fees.
We hope that your borrower pays you on time. However, these simple guidelines for drafting promissory notes will protect you if this is not the case and future litigation is needed. Also, it might be a good idea to hire a debt collection attorney to review your promissory note. Local attorneys understand the legal provisions for each State and can provide additional wording to protect you.
Kind and Dashoff, LLC is a law firm and a licensed and bonded collection agency. The attorneys at Kind and Dashoff, LLC are experts at promissory notes in Maryland and Washington, DC. They are available to help you collect your unpaid promissory notes. They work hard to collect the money that is owed to you.