subject: 8 steps to writing a Legally Binding Promissory Note [print this page] 8 steps to writing a Legally Binding Promissory Note
Here are 8 key elements that must be included in a promissory note to make it legally binding.
1. Write the date of the writing of the promissory note. This is should be included at the top of page 1 of the Note.
2. Include the names of both the lender and the borrower on the Note. Also include their addresses.
3. Include the dollar amount of the loan. This should be written in both the numeric value and long form (written out in words), in very much the same way as you would on a check.
4. Outline the repayment terms. These terms should include the amount of the periodic payment, the frequency of the payments (i.e. weekly, monthly or quarterly), the date the first payment is due and the day and the months that all subsequent loan payments are due. Lastly, indicate the last day and month of the final payment on the Note. An excellent payment calculator can be found at http://www.One2Onelending.com.
5. The complete mailing address where each payment is to be mailed should be incorporated in the Note.
6. Include the interest rate associated with the loan. The interest rate should be expressed as an annual rate with a numeric value and a percent sign (again, also include the numeric value written out in long form again as you would on a check). The interest rate should also indicate if it is a fixed or variable rate.
7. Include if the Note is secured or unsecured. If the borrower is using collateral to secure the loan. Collateral can be a number of different assets and some of the more frequent include: a home, car, business or bank deposits. Be careful to describe the collateral in detail including such descriptions as the homes address, the car's serial number or title number and the number of the bank account as well as the bank's name and address
8. At the bottom of the Note the borrower and Lender should sign their name (printing the name below the signature) and date the promissory note, acknowledging the obligation to repay the loan.
One2One Lending's Resource Center can assist you with all of your Promissory Note questions.
