Promissory notes should include basic information such as the names of the borrowers and lenders as well as the amounts and terms of the loans, according to Inc. They should also include the repayment schedule, interest rates and loan security agreements.Continue Reading
Borrowers or lenders writing promissory notes should include the terms of repayment along with specific repayment dates, advises Inc. Repayment options include one-time payments including interest at the end of loan periods, monthly payments that include distributions to both the principal and interest, and amortized payments in which borrowers pay only interest each month and make lump sum principal payments at the end of loan periods. People writing promissory notes must also include interest rates that are at least the minimum set by the federal government to discern loans from gifts. The interest rate must also comply with any state laws regarding maximum interest rates.
Those writing promissory notes should also include a listing of any collateral used to secure the loans as well what happens to the collateral if the borrower does not meet the terms of the promissory note, as Inc. explains. These terms should include the distribution of funds between borrower and lender if the collateral is worth more than the remaining principal at the time of loan default. Those writing promissory notes should also be as specific as possible regarding penalties for missed or late payments and defaults.Learn more about Personal Banking