A promissory note is a written financial record of the details surrounding a loan between two parties. It encompasses every aspect of the financial agreement and serves as documentation and proof of the transaction.
Promissory notes are essential if proof of a loan is required. A promissory note typically documents the important details of the transaction, such as the time frame and schedule of the loan, the amount of interest and where and when the loan must be paid.
Promissory notes are held by the party that made the loan for assurance that it will be honored within the specified terms. They belong to written forms of financial documents called commercial paper, which also includes checks.