Promissory notes should include legal bindings between the borrower and the lender. It should contain all the information required to show that the money is borrowed and the time period for the repayment. This document should contain every minute details of the loan so that the document can have legal binding in a court. Most of the times, this kind of documents are prepared by an attorney, financial institution or a bank. Individuals also can write the document by themselves, but should include the details required to have a legal binding for the money borrowed.
The most important point to remember while writing a promissory note is to include a date at the top of the document because based on this date the terms of the document is created. Also write the amount borrowed which is referred as the principal amount. The principal amount has to be written in numeric with decimal places, if any. You can write the amount as you will write the amount in a check. The amount should be written in the document to avoid any kind of misinterpretations regarding the money to be returned.
The terms and conditions should also be described in the promissory note. The document should explain whether the money has to be returned on demand, monthly payments, quarterly payments, weekly payments or any kind of balloon payment required at certain point of time. You should include the due date, month, year and day of the first payment. You have to include the final payment year, month and date in the document. Some of the documents need to be included with amortization schedule that shows every payment and balance during that time depending up on the interest rate. The rate of interest also should be listed in the document.
The interest rate of the amount borrowed must be written both in numerics with percentage symbol and in words. Whether the interest rate is fixed or flexible also should be explained in the promissory note which is usually seen in home mortgage loan payments. The interest rates of home mortgage loans can be increased as time passes and because of this the interest rate also will be increased. Next, you have to explain whether this is an unsecure or secured note. Majority of the mortgage loans shows that their promissory notes are secured using a Deed of Trust. Deed of Trust is a record whereas the promissory note is not a record.
The promissory note should contain the note holder's name. The name can be of a person, company, financial institution or individuals who has borrowed the amount and to whom the money to be returned. Write the address to where the repayments to be sent. The notes should contain the signature of the borrower towards the bottom of the note.
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