Finance Solution

While you might not think that lending money to another member or your family or a good friend would be a poor decision, this type of loan is defaulted on more than any other kind of loan being made. Whether you want to or not you should use a promissory note example to prepare one of your own that both parties must sign before the loan is made. We would all like to think that we can trust our friends and certainly members of our own family, but where money is concerned and most especially a large sum of money, you need to make sure you are legally protected.

The promissory note dates back over 10,000 years ago and has always been a relatively simple document that is used as a legally binding contract between the lender and the borrower as proof of the loan. With this single document you can take anyone who defaults on a loan to court and use it as proof that they did indeed borrow the money and have failed to live up to their commitment to repay the loan. In most cases the courts will side with the lender and order the borrower to repay the debt and all of the costs of attempting to collect on it.

In the early days this type of agreement generally included just the names of both parties involved and the amount of money that was to be repaid. Today they are a little more complicated when used by a bank or financial institution in order to complete a loan. Beyond the standard information of who and how much, the document will show the interest rate that is being charged, how much the payments are to be and when they are due. It will also show how much the total payoff is and when the loan must be paid off by.

To remove any risks of misunderstanding the modern promissory note also includes information explaining what steps will be taken if the borrower fails to make the agreed upon payments. These steps must be explained in detail and can vary from state to state dependent on the laws. They may include late fees, repossession of any real property purchased by the loan and a civil law suit for which the borrower will be responsible for all costs on top of paying back the loan. Even though this is a very simple document you can download a promissory note example from many sites on the web, make sure the one you plan to use is legal in your state otherwise you may not be able to use it to get your money back.

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