A promissory note is used to record a promise to pay. Promissory notes are legally binding contracts used to document details of financial or real estate transactions between two parties. They can be used to record the details of either personal or business loans.
A personal promissory note should be used to document loans between family and friends. While many people shy away from drafting legal documents with family members; doing so can eliminate misunderstandings. When repayment terms are outlined in black and white, no one can say they weren't informed or thought the money was a gift.
Personal promissory notes should include the names of all parties involved; loan amount; interest rate; payment dates; late fees; and what happens if the Borrower defaults on the loan. When charging interest or late fees, the personal lender must adhere to their states' usury laws.
Usury laws dictate the amount of interest which can be charged on loans and credit cards. Usury laws are regulated at both state and federal levels and violation can lead to jail-time.
A commercial promissory note is used when borrowing money from a lending institution. Commercial notes are similar to personal promissory notes in that they outline repayment terms, loan amount, interest rate, etc.
The primary difference between the personal and commercial promissory notes is banks are considerably less patient when Borrowers default on their loan. When using commercial promissory notes, the lender has the right to demand payment in full if the borrower misses one payment.
A negotiable promissory note is used to document real estate transactions. Real estate promissory notes are governed by the Uniform Commercial Code and must adhere to conditions outlined by the National Conference of Commissioners on Uniform State Laws.
Real estate promissory notes should be executed by a qualified real estate attorney, when engaging in "For Sale by Owner", seller carry back financing, or rent-to-own transactions.
Promissory notes can be used by investors to raise capital for a business. An investment promissory note is provided to investors in exchange for funds. Investment promissory notes guarantee investors receive a return on investment within a specified period of time.
Anyone who holds a promissory note has the option of selling all or part of the note in exchange for cash. When a partial promissory note is sold, the note holder assigns their right to payment to the buyer. Once repayment terms are met, the promissory note payments revert to the original owner.
Simon Volkov is a private note buyer and can advise you of the options for selling whole or partial promissory notes. Feel free to contact Simon to request a complimentary meeting.
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