Promissory Notes

Promissory Note - Interest-only Payments

A Promissory Note for Interest Only Payments allows the borrower to make payments against interest only until the end of the loan term when the principal is due. The note should state the interest rate and payment schedule of interest, i.e., monthly payments due on the 15th day of each month.

During the loan term, the principal stays the same. Depending the terms of the note, the principal may be prepaid at any time without a penalty. At the end of the loan, the borrower is required to make one large payment to cover the entire principal and any remaining interest.

The main advantage of this type of payment arrangement is low monthly payments during the loan term.

Posted in Promissory Note Interest-only | No Comments »

Convertible Promissory Note Definition

What is a convertible promissory note?

It is a kind of a promissory note that can be converted by the note-holder into financial assets (financial conversion) or something physical such as gold or cash (physical conversion) at any time. Like other promissory notes, it can bear interests and be payable on its due date. But typically conversion is the usual purpose between two parties rather than repayment.

Currencies are considered to be financially convertible promissory notes as you can purchase bonds, stocks, other financial assets from a company or the government. It is this financial convertibility that the entire banking system in the world is based on.

Some companies issue convertible promissory notes as a means to grow. The notes can be exchanged for stocks, cash or any other items as stated. When a company issues convertible promissory notes to raise funds, the investors usually keep the notes until the maturity date.

Posted in Promissory Notes for Business | No Comments »

Demand Promissory Note - Promissory Note Payable on Demand

A Demand Promissory Note is relatively a simple note in the arrangements of interest rates and repayment. This note does not carry a fixed end date, but is due when the lender demands it to be repaid. That is, the borrower doesn’t need to pay back the loan until the lender demands. Generally, the lender gives the borrower a certain period of time until the repayment is due.

A Promissory Note on Demand usually has the following information:

The name of the borrower
The date of the loan
The amount of the loan
The interest rate to be charged

Posted in Promissory Note on Demand | No Comments »

When Does a Spouse Need to Sign a Promissory Note?

To make a Promissory Note valid, the borrower must sign the note. Sometimes, the lender may ask the borrower’s spouse to sign the Promissory Note as well when the loan is made for a business that both husband and wife run, or for a property that both spouses own, community property or jointly-held property.

By having both spouses sign the note, the lender has more protection: the lender could get a judgment against not only the borrower but also the borrower’s spouse. Also, the lender could seize the properties in the borrower’s name alone and in the borrower’s spouse’s name alone as well as put a lien on jointly-owned assets.

Posted in Promissory Note Information | No Comments »

Signing Duplicate Copies of a Promissory Note

Sometimes people make copies of a contract or an agreement, and each party signs a copy. With promissory note forms, this should be avoided.

Remember each signed promissory note is enforceable. If there are two copies of signed notes, it means the borrower has promised to pay the money specified in the Promissory Note twice.

If you, the borrower, like to keep the copy of the promissory note as a record, make copies before you sign the note. And sign the original Promissory Note only that the lender will keep.

Posted in Promissory Note Information | No Comments »