A promissory note is a document which will perform the function of standing witness
to the transaction which has been entered into between the lender and the borrower. This transaction will involve a certain amount of money which has been lent by the lender to the borrower. The amount of money which is being exchanged between the lender and the borrower will be specified clearly in the promissory note. The amount of time for which the money is being lent will also be stated apart from the rate of interest which is being charged on the amount which has been borrowed. The time within which the amount will have to be repaid to the lender by the borrower will also be stated clearly in the promissory note. The specific date of repayment will also be specified.
Demand promissory notes are those promissory notes where the specific date of repayment or the date of maturity of the promissory note will not be specified. This means that the borrower will have to repay the amount which has been borrowed with interest to the lender at any time he desires. But the lender is usually obliged to give a few days' notice to the borrower before he decides to make use of the demand clause which is available in the demand promissory note. The borrower should read all the terms and conditions of the demand promissory note carefully before he signs it and accepts the specified terms and conditions.
A promissory note is different from IOU which is issued in certain cases. An IOU is only a proof of the existence of the debt between the debtor and the creditor. But no terms and conditions will be stated in this unlike a promissory note. The specific time within which the amount should be repaid and the manner in which it needs to be repaid will have to be specified in the promissory note.