sample assignment of promissory note

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Assignment of Promissory Note

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An Assignment of a Promissory note is a bilateral document that transfers the rights and obligations associated with a promissory note from one party (the assignor) to another party (the assignee). Jotform Sign ’s Assignment of Promissory Note shows the date the document was created, assignor information, assignee details, start and end dates of the promissory note, total amount due, interest rate percentage, and chosen payment method.

You can easily make changes to this Assignment of Promissory Note using our intuitive online builder. No coding or design experience is required — just drag and drop to add or edit form fields, update the wording of the document, include additional signature fields, change fonts and colors, and more. You can also set up an automated signing order to ensure signatures are received in a timely manner and in the correct order. Once signed, you’ll automatically receive a finalized version of the document for your records.

Letter of Authorization

A letter of authorization is an agreement between the person, known as the principal, authorizing another, known as an agent, to perform certain functions or powers in order to perform the duties of the principal. This letter also contains the period of effectivity of the contract of agency between the principal and the agent. Share Jotform’s free Letter of Authorization via email and securely collect electronic signatures from any device. Once signed, a finalized PDF document will be sent to your inbox — ready to download, print, and share with the appropriate parties.You can make changes to this Letter of Authorization in just a few easy clicks using Jotform’s intuitive form builder. Simply drag and drop to add or remove text fields, include additional signature fields, change fonts and colors, include your own branding and letterhead, and other design changes. Ditch messy paper forms and streamline your e-signature process with this free Letter of Authorization from Jotform. If you want to take your signing process online, create an e-sign document with Jotform Sign.

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Letter of Recommendation for Student

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These templates are suggested forms only. If you're using a form as a contract, or to gather personal (or personal health) info, or for some other purpose with legal implications, we recommend that you do your homework to ensure you are complying with applicable laws and that you consult an attorney before relying on any particular form.

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Promissory Note

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What is a promissory note?

A promissory note, also known as an IOU, is essentially a one-sided document with which a borrower agrees to pay a lender back for money borrowed . Often, promissory notes are used in place of more formal loan agreements when the loan is being made informally between friends or family members. Promissory notes can even sometimes be used between very small businesses. A promissory note's primary function is to serve as written evidence of the amount of the debt and the terms under which it will be repaid.

What is the difference between a loan agreement and a promissory note?

Though they are both documents used to outline the details of a loan, a loan agreement and a promissory note are different in several respects. The main difference is that a loan agreement is much more detailed and complex . It includes extensive provisions about when and how the borrower will repay the loan and what sorts of penalties will be incurred if the borrower does not follow through with repayment. Loan agreements are usually used when large sums of money are involved , such as student loans, mortgages, car loans, and business loans.

Promissory notes are much simpler documents. Unlike a loan agreement, which is binding on both the lender and the borrower, promissory notes are a one-sided document where the borrower agrees to repay the lender. Promissory notes are typically used for more informal arrangements between friends and family members or very small businesses.

For more information about which document to use in which circumstances, please refer to the guide What is the Difference Between a Promissory Note and Loan Agreement .

Is it mandatory to use a promissory note?

No, it is not mandatory to use a promissory note when one party lends another money. Many times, friends or family members lend each other money informally without keeping a written record. However, it can be beneficial to use a promissory note because having written proof of the loan makes it much more likely to be repaid.

What is "interest"?

In the context of a promissory note, interest is the monetary charge for the privilege of borrowing money, typically expressed as an annual percentage rate . An interest rate is a pre-determined percentage of the total loan that accumulates over time and is added onto the original loan amount at the end of each year.

What must a promissory note contain?

A valid promissory note must contain at least the following mandatory sections:

• Parties : The promissory note should include the name and contact information for all the involved parties, including the borrower and the lender.
• Loan amount : The promissory note states the amount of money that is being borrowed, as well as the date on which this will happen.
• Repayment details : The promissory note specifies the date by which the loan will be paid back, as well as any interest that will be charged on the loan.

Who can enter into a promissory note?

The party entering into the promissory note is known as the borrower . Both individuals and businesses may enter into a promissory note. For individuals entering into promissory notes, they must be of legal age to enter into a contract, 18 years of age or older in most states. They must also be mentally competent to enter into a contract. Business entities entering into a promissory note must have the legal authority to do so, usually outlined in the business' governing documents, such as bylaws or operating agreement.

What is not allowed in a promissory note?

Though the lender may charge the borrower interest, most states have laws regarding the maximum amount of interest that they may charge. These laws are known as usury laws and vary from state to state.

What should be done after the promissory note is written?

Once all the provisions of the note have been filled out, the parties should print out the document and the borrower should sign and date it. Since the note is only binding on the borrower, they are the only one who must sign it. Each party should save a copy of the note for their records in case of future misunderstanding or dispute.

Which laws are applicable to promissory notes?

Promissory notes are a matter of both state and federal law. Promissory notes are primarily controlled by Article III of the Uniform Commercial Code (the "UCC") . The UCC governs commercial transactions, and article III specifically applies to promissory notes and loan agreements.

The Truth in Lending Act ("TILA") is a federal law that requires lenders to provide borrowers clear and thorough information about the terms of the loan into which they are entering, including the interest rate and any fees associated with the loan.

State-specific usury laws dictate the maximum amount of interest that may be charged on a loan. Statutes of frauds , also state-specific, require that loans over a certain amount be memorialized in writing to be enforceable.

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Guides to help you

• How to Get your Debtor to Pay
• What is the Difference Between a Promissory Note and Loan Agreement?
• Should I Use a Promissory Note for a Friendly Loan?

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Promissory Note Template

Use our promissory note template to detail the terms of loan repayment.

Updated August 16, 2024 Written by Sara Hostelley | Reviewed by Susan Chai, Esq.

A promissory note records all the terms and conditions of a loan transaction between a borrower and a lender before any money changes hands.

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What is a promissory note, when should i use a promissory note, how to write a promissory note, usury limits by state, promissory note sample, frequently asked questions.

A document used to include collateral in a high-stakes loan.

A document used for quick loans with trustworthy borrowers.

A promissory note is a written promise by a borrower to repay a loan to a lender according to predetermined terms and conditions.

Before the lender provides the requested funds, the lender and borrower should agree upon the loan’s terms, such as the loan repayment schedule, interest rates, and collaterals. Once they agree, they can document the terms accordingly.

After signing the note, the borrower receives the amount promised by the lender and pays back the loan according to the terms. Eventually, the lender will release the borrower from the promissory note once the loan is completely paid off.

Is a Promissory Note Negotiable?

Some promissory notes are negotiable , meaning the original payee can transfer the note to another party. However, not all promissory notes are negotiable.

Common scenarios in which you may use a promissory note can include:

• Informal loans: Lending money to friends or family members via personal loans .
• Real estate loans: Providing a private mortgage to a home buyer .
• Business loans: Financing a business for start-up or expansion.
• Vehicle loans: Funding for the purchase of a car , boat, or other motor vehicle.

Typical Scenario

Purchase of a Vehicle or Other Item with Financing

• Bill of Sale : This document transfers ownership of the vehicle or item from the seller to the buyer.
• Promissory Note: This document outlines the buyer’s promise to pay the seller (or a financing institution) a specific amount of money over a specified period.

Promissory notes are typically for less complex loans or when there is a prior acquaintance between the lender and the borrower. By using promissory notes, lenders ensure legal protection for themselves in the event of a borrower’s failure to return the borrowed money.

Step 1 – State the Parties

Identify the borrower (the party receiving the loan) and the lender (the party who will be paid back). The parties can be individuals or business entities, such as corporations or LLCs. If either party to the promissory note is a business entity, a representative must sign on its behalf.

If the borrower’s financial stability is questionable, the lender may demand a cosigner with good credit as a safety net for the promissory note.

How should I verify a borrower's financial status?

Consider requesting your borrowers to supply their credit reports for loans.

Borrowers can access these free yearly reports online through websites like AnnualCreditReport.com or credit card company perks. Some online agencies also offer paid financial status checks.

Step 2 – Outline Repayment Terms

Next, you should clearly outline the following details about the loan and how the borrower will pay it back:

• Principal amount: The total amount of money borrowed;
• Repayment schedule: How the borrower plans to pay, whether it’s in installments, a lump sum payment, or on demand;
• Due date: The day when the lender can expect the borrower to make their final payment;
• Security or collateral: Whether the borrower needs to guarantee the loan with their asset(s) and secure the note;
• Late fee: Whether there will be an additional fee if the borrower fails to pay on time;
• Accrued interest: The interest rate the lender will add to the unpaid principal (in compliance with usury limits );
• Acceleration: Whether the lender can ask for the whole loan to be paid back at once, regardless of the original payment plan;
• Prepayment: Whether the borrower can pay back the loan early without any extra charges;
• Default provisions: The consequences if the borrower can’t fulfill their end of the loan agreement;
• Guarantors: People who promise to repay the loan if the borrower defaults.

When determining repayment terms and writing the entire agreement, the lender should consider carefully the borrower’s financial condition and the risks associated with the loan. For example, if your borrower has low credit, you may opt for a secured promissory note if the borrower defaults.

Step 3 – Consider Additional Terms

Before you complete the promissory note, consider including additional provisions to make your note more comprehensive, such as:

• Amendment: How the parties can alter the note;
• Governing law: Which state laws will apply to the note;
• Joint and several liability: How all co-borrowers share responsibility for the repayment of the note, collectively and individually;
• Right to transfer: Whether the lender has the right to transfer the promissory note to a different party.

Step 4 – Sign the Note

After both the borrower and lender agree to the note’s terms, all parties, including the guarantors if there are any in the arrangement, should sign the note.

Although it’s not legally required, you may consider getting the promissory note notarized if the loan involves a significant amount of money or the terms are complex.

Please only exchange money after the parties sign the note. Furthermore, every party to the note should receive a copy, and the lender should store the original securely.

What happens if I lose the original note?

A copy will suffice if you lose the original. If neither the original nor a copy is present, you may find other ways to prove the agreement’s existence (such as a text exchange). Be aware that the borrower may not have an obligation to repay if there’s no proof that the loan occurred.

Step 5 – Enforce the Note

Generally, there are three potential outcomes once a promissory note is in effect:

• Timely repayment

Suppose the borrower pays the total amount per the note’s conditions. In that case, the lender should provide a loan release form to relieve the borrower of any further obligations related to the note.

• Delayed repayment

In case of late payment, the lender must issue a demand letter requesting the full payment and any applicable late fees. If the borrower still fails to make up for the payment, the lender must evaluate the financial viability of initiating legal action.

• Non-repayment

If the borrower completely defaults on payment, you can enforce it by reminding them of their obligation. If the borrower doesn’t respond or refuses to pay, you can recruit outside help.

For example: John lends $5,000 to his friend Mark, who signs a promissory note agreeing to repay the amount within six months. However, after the deadline passes, Mark fails to repay the loan. John attempts to contact Mark, but after several unsuccessful attempts, he decides to take legal action.

John presents the signed promissory note to the court as evidence of the debt agreement. Because the note includes all the required elements, such as the amount, interest rate, and repayment terms, the court rules in John’s favor, ordering Mark to repay the loan plus any accrued interest.

The lender can pursue repayment (and collateral repossession, if applicable) via small claims court (a less expensive venue that doesn’t permit attorney representation, thereby eliminating attorney’s fees) for loans under the state limit . Litigation may be necessary if the loan exceeds the lender’s state limit.

Usury is the illegal practice of setting the interest rate on debt (including all extra charges like fees and discount points) higher than the maximum limit set by the relevant law or beyond what’s allowed in an exception to the law. Therefore, usury rates refer to the practice of charging excessively high-interest rates on loans, often exceeding legal limits.

To prevent it, each state has different legislation aimed at limiting the annual percentage rate (APR) a payday lender can charge, depending on the size of the loan, who is making the loan, and loan type.

For example: Sarah, a single mother, faces a financial crisis when her car breaks down, jeopardizing her job and her ability to care for her children. Seeking help, she turns to a recommended private lender who agrees to lend her $2,000 for repairs but imposes an exorbitant 25% monthly interest rate.

Despite struggling to keep up with payments due to the high rate, Sarah is unaware that her state’s usury laws cap interest rates at 10% per month. The lender’s exploitation of her desperate situation violates these laws, plunging Sarah deeper into debt and perpetuating her financial hardship.

In the absence of federal regulation around usury interest rates, each state has its own process for determining the rate, and they may use the following as a baseline:

• short-term or long-term Treasury Bill rates
• the U.S. prime rate
• fixed rates
• agreed-upon rates

Download a free promissory note template as a PDF or Word file below:

What makes a promissory note invalid?

A promissory note may be invalid if:

• It lacks essential elements like the amount owed, the interest rate, and the repayment terms;
• Either party signed it under duress (i.e., someone was threatened or forced to sign it);
• It involves illegal activity (i.e., loan sharking or money laundering);
• It’s forged or fraudulently altered.

Does a promissory note need to be recorded?

Typically, promissory notes are not recorded with the county; the lender simply retains them in their records. Some jurisdictions may require the parties to record promissory notes if they involve real estate.

Can I sign a promissory note electronically?

Yes, you can sign a promissory note electronically. The E-Sign Act upholds the validity of online signatures. However, you must ensure the process follows all relevant laws and standards in your jurisdiction.

How long is a promissory note valid?

A promissory note can last three to 15 years , depending on the jurisdiction. Its statute of limitation is generally the same as that of other written agreements.

However, this period may extend to 15 to 30 years for real estate-related notes.

What happens if the borrower defaults on a promissory note?

The lender can file legal action to retrieve the loan’s outstanding balance and any owed fees or interest. The lender may also recover costs associated with the lawsuit, such as attorney’s fees.

Is a promissory note legally binding?

Yes. A promissory note is legally binding whether the borrower supports it with collateral or simply the promise to repay.

Related Documents

• I Owe You (IOU) : Used to specify the details of a loan made between a borrower and a lender.
• Sales Agreement : Outlines the terms of a sale where there is an exchange of goods.
• Loan Agreement : Enforce a promise between a lender and a borrower if one party does not hold up their end of the bargain.
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How to Write a Promissory Note

Find out what's included in a promissory note, how to write one, and download a free template. Includes frequently asked questions.

Updated on September 19th, 2023

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A promissory note is a document written by a borrower to a lender. The note acts as a formal promise to pay whatever funds are owed, either on-demand or by a specified date. Promissory notes may be used when businesses borrow money from private/alternative lenders or even financial institutions in some cases.

Promissory Note Template - Free Download

Use our promissory note template in Microsoft Word to create your own customized note.

What to Include in a Promissory Note:

• Names of debtor(s) and lender(s).
• The amount of the loan.
• Terms (repayment timeline, interest, etc.).
• Signatures of both parties.
• Details about collateral, if applicable.

Secured vs. Unsecured Promissory Note:

A secured promissory note is one that comes with collateral for the lender to hold until their money is paid back. The lender may specify what collateral will be acceptable.

An unsecured promissory note is a promissory note that is written without any collateral. Unsecured notes may be used with small sums of money where there is less risk of the borrower defaulting.

How legal is a promissory note?

A promissory note is a legally binding document, just like a contract. It can be upheld in a court of law if both parties have signed the note.

How do you write a promissory note?

Your note should include the names of both parties, signatures, the amount of money being loaned, and the terms of repayment.

What is an example of a promissory note?

If a new business needs short-term funding to purchase more inventory, they may write a promissory note for $10,000 to a private lender who gives them the money for two months and changes interest at whatever rate both parties agree to. See our template for another example .

Is a promissory note negotiable?

Yes, a promissory note is negotiable in the sense that its ownership can be transferred. Thus, the original lender may be able to sell it to another party and transfer their ownership, meaning that the new party has the right to debt.

Will a promissory note stand up in court?

Yes. A promissory signed note is legally binding, just like a contract.

Can a promissory note be handwritten?

As long as the note is signed by both parties, it is considered to be a legal document, even if it is handwritten.

How long does a promissory note last?

Promissory notes are subject to the statute of limitations in whatever State they are written. The statute ranges from 3 years to 15 years. Check your State's laws regarding promissory notes for more information.

Who can issue a promissory note?

A promissory note can be issued by either an individual or a corporation. If a corporation issues a promissory note, it will accept all liability associated with the debt.

Do banks accept promissory notes?

In some cases, banks may accept promissory notes as a means of helping you to qualify for a mortgage or loan. However, you can't "cash in" your promissory note at a bank.

What is the difference between a check and a promissory note?

A check can be deposited directly into your bank account, while the money from a promissory note can only be obtained directly from the debtor.

Do both parties have to sign a promissory note?

In order for a promissory note to be legal, both parties must sign it. The signatures show that both parties have consented to the terms of the note.

How much does a promissory note cost?

You can draft a promissory note for yourself at no cost, but it is advisable to hire a lawyer who can draft and review the document for you. The cost of this will depend on your lawyer's hourly fees.

What are the types of promissory notes?

• Commerical.
• Real Estate.
• Investment.

How do I mark a promissory note paid in full?

Keep the original note, and once the borrower has paid back their loan in full, mark "paid in full" on the note. Sign the note to verify that it has been paid, and return it to the borrower.