A promissory note is a legal document that outlines a financial promise or obligation between two parties. You might run into promissory notes or MPNs when getting loans or paying rent.
Loans and promissory notes have a few things in common. They both are legal documents, financial documents, and they both outline a promise or obligation between two parties. But there are some key differences to remember, especially if you are about to enter into a loan agreement or sign a promissory note.
What is a promissory note? First of all, these notes can also be called a “note payable” or a “PN” for short. It is a legal document that outlines a financial promise. Usually, a document like this outlines a financial obligation like the promise to pay back a borrowed sum of money. You can remember the promissory note definition by thinking of it as a financial promise note. It’s a note that promises person A will pay back X amount of dollars on X date to person B.
This note will then outline all the information pertaining to the debt obligation like the principal amount borrowed, the interest rate, any fees or charges, the date the amount was borrowed and the dates payments are due, and the names and signatures of both parties involved.
Though they are both legally binding financial obligations toward an incurred debt, there are some key differences. A loan can often come with a promissory note, especially if the loan is for a small short-term loan, or if the loan is from a nontraditional lender. But a promissory note doesn’t necessarily have to do with a traditional loan transaction.
Promissory notes can also be used in other financial situations besides a loan, and they can be used between friends, family, or nonlending businesses that are willing to take the note. Having a legal document outlining this transaction and the future debt obligation is important, even if the loan is between family members or friends.
Promissory notes can also be used in the instant of paying for something in installments rather than all at once. Though this is similar to an installment loan, this payment promise is toward a purchase you promise to complete in increments, rather than a borrowed sum of money.
This type of note is exactly as it sounds. It’s a legal document that outlines when a sum of money is due. This might be when a loan amount or loan repayment is due, but it could also outline when your rent is due. For instance, a landlord might give a tenant a promissory note if they are late making rent payments. This can sometimes allow tenants to work alongside their landlords when they aren’t able to pay their rent on the exact monthly due date, but can promise to make that payment in a week or two instead.
A DOD note is most often used between two parties that are more familiar with each other like friends or family members. Like its name, this type of note means that the outlined payment is due on demand, rather than on a specified date. This means that the lending party is able to request the payment at any time. They are usually set up to be a “pay when you can” type agreement to help out a close friend or relative.
The useful thing about these legal slips is that they are able to be used by regular individuals as well as businesses and lenders. This means that the next time you want to let a friend or family member borrow money, you can make the transaction more official by using this promissory note sample or creating your own.
To create your own you just have to make sure it includes all the necessary details about the loan transaction:
There are many reasons why you might need your own promissory note one day. You might need to lend money to a relative in need of help, or who would rather borrow from a family member than a lender. Borrowing from family can also help the borrower avoid interest rates and fees while still repaying the lender.
Whether you want to let someone borrow money from you or would like to borrow money from someone else, it’s always a good idea to set up an official repayment plan. That way both parties involved will have a clear understanding of the borrowing agreement and terms.
If you find yourself in need of a promissory note template, you can use the one below to help make all your personal borrowing transactions more official.
A Master Promissory Note (MPN) is a type of promissory note used with student loan repayments. It is a legally binding contract between a student and their student loan lender, or the US Department of Education. This note outlines all the details of the student loan just like a regular PN would do.
There are two types of MPNs you are required to sign when borrowing for school expenses. If you are an undergraduate student you will be required to fill out an MPN for Subsidized/Unsubsidized loans. If you are a graduate student you will be required to fill out a PLUS MPN or MPN for Subsidized/Unsubsidized loans that are specifically for graduate students.
Keep in mind that by signing an MPN you are promising to repay your debt no matter what, even if you don’t finish school or have to declare bankruptcy.
It’s always a good idea to not only read the full terms and conditions of anything you sign, but also use official documents in all your transactions, whenever you can. This will help your personal business transactions be more official and protect you in case any parties involved break the terms of the contract.
Payday Loans are also commonly referred to as Cash Advances, Payday Advances, Payday Advance Loans, and Fast Cash Loans. Check City does not usually utilize traditional credit checks as part of the payday loan approval process. However, Check City may, at its discretion, verify application information by using national consumer loan underwriting databases that may include information relating to previous cash advance transactions that Check City may take into consideration in the approval process. Actual loan amounts vary. See Rates and Fees for specific information and requirements. Products or services offered to customers may vary based on customer eligibility and applicable state or federal law. Some customers applying for payday loans or installment loans may be required to submit additional documentation due to state law and qualification criteria. CheckCity.com provides loan services in: Alabama, Alaska, California, Hawaii, Idaho, Kansas, Missouri, Nevada, Texas, Utah, Washington, Wisconsin, and Wyoming. Customer Notice: A single payday advance is typically for two to four weeks. However, borrowers often use these loans over a period of months, which can be expensive. Payday advances are not recommended as long-term financial solutions. Loan proceeds issued through our website are generally deposited via ACH for next business day delivery if approved by 8pm CT Mon. – Fri.
Check City acts as a credit services organization/credit access business (CSO/CAB) in Texas.
This is an invitation to send a loan application, not an offer to make a short term loan. This service does not constitute an offer or solicitation for payday loans in Arizona, Arkansas, Colorado, Georgia, Maryland, Massachusetts, New York, Pennsylvania, or West Virginia. Tosh of Utah, Inc. dba Check City Check Cashing, a payday lender, is licensed by the Virginia State Corporation Commission. License #PL-57 Anykind Check Cashing, LC. dba Check City, a payday lender, is licensed by the Virginia State Corporation Commission. License #PL-21 Maximum funded amount for payday loans or installment loans depends on qualification criteria and state law. See Rates and Terms for details. Utah Customers: For consumer questions or complaints regarding payday loans and/or title loans you may contact our Customer Service Department toll-free at (866) 258-4672. You may also contact our regulator The Utah Department of Financial Institutions at (801) 538-8830.
Please see Rates and Terms to check the availability of online loans in your state. Check City does not provide loan services in all states.