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 agrees on some terms and conditions with a promise to pay on a specific future date. This note defines the 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. Moreover, 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. Generally, it ensures smooth completion of a business transaction and helps parties to trust each other.
Significance of Promissory Note:
A promissory note template is a revolutionary tool which encourages businesses to progress and expand. To safeguard the interests of all parties, it plays the role of a bridge, which removes gaps between parties and assists them in completing the transaction successfully. Perhaps, this note could be used to submit an application for obtaining a credit amount or a line of credit from an 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 to use a promissory note where you wish to get back loan amount quickly.
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 the 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 detail 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 a promise is made. He or she is a person or institute who is entitled to receive repayments of a loan along with interest payments at a mutually agreed interest rate.
Obligor: An “obliger” is a person who is the person who takes the benefit of a borrowed loan. The obligor can be the person who actually makes repayments, but it is not the case with all transactions. A “promisor” can also make repayments on behalf of the obligor.
Obligee: “Obligee” is another word used for “promisee” while discussing a promissory note. An obligee is a person to whom a promise is being made.
Consideration: The “consideration” is actually the borrowed money for the promisor. Whereas, the interest amount will be the consideration of the “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.
Details of Promissory Note Template:
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 a loan. Moreover, 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 a country or state’s laws in consideration to ensure the legality of the note. A promissory note template is a 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.
