Promissory notes are used to record details of a loan transaction between two or more parties. They are used in a wide range of business loans, financial and real estate transactions, and personal loans between family members and friends.
It’s important to realize promissory notes are legal contracts and can be held against you in a tribunal of law. It’s essential to understand the various types of promissory notes and how they’re used before signing any agreement. Look at : get a pay day loan in Atlanta GA.
The most common types of promissory notes include those used to document personal loans between family members or friends. Most people shy away from requesting legal documentation when lending money to personal acquaintances. While it’s understandable you do not want to offend someone you care about, promissory notes can actually help prevent misunderstandings.
When friends and family draft a personal promissory note it demonstrates a good faith effort on behalf of the Borrower. It likewise creates a feeling of security for the Lender. Personal promissory notes can be bought at office supply stores or downloaded from the Internet. The note should include the provisions of the loan, amount borrowed, interest rate and what consequences will occur if the Borrower defaults on the loan.
Commercial promissory notes are used when money is borrowed from a bank or other lending institution. Commercial notes are similar to personal notes; however, they include additional legal terms and more rigorous conditions.
Typically, when a Borrower defaults on a commercial promissory note, the lender has the right to require full payment. If you owe $3, default, and 000 on your payment, the signed promissory note gives the Lender the power to require the entire balance. If you don’t pay the full balance, the Lender can then place a lien on the property you’re financing. They can also file a lawsuit to get the balance or regain possession of the property. Not only will you lose the property, it will significantly impact your credit rating.
If borrowers default on commercial promissory notes the lender can demand payment in full. If past due payments are not cured the lender can commence with legal action such as repossessing property used as collateral to secure financing or garnishing wages.
Some organizations use promissory notes to raise capital for business. This type of business note is known as an Investment promissory note. The note is issued to investors in return for the loan. Investment notes guarantee investors will get a return on their investment within a given period of time.
Negotiable promissory notes are used to secure real estate transactions. These notes are covered by the Uniform Commercial Code. Real estate promissory notes must adhere to conditions set out by the National Conference of Commissioners on Uniform State Laws.
Personal promissory notes are simple documents and can normally be drafted without the help of a lawyer. Commercial, Investment and Real Estate Notes will require the services of lawyer to ensure they’re legally binding.
Mutual Consideration-When there is a contract between two parties there must be some value received by both parties. This is referred to as ‘mutual consideration’.