what is promissory notes?
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a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.
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The terms of a note usually include theprincipal amount, the interest rate if any, the parties, the date, the terms of repayment (which could include interest) and thematurity date. Sometimes, provisions are included concerning the payee's rights in the event of a default, which may includeforeclosure of the maker's assets. For loans between individuals, writing and signing a promissory note are often instrumental for tax and record keeping. A promissory note alone is typically unsecured.[1]
TerminologyEdit
The term note payable is commonly used inaccounting (as distinguished from accounts payable) or commonly as just a "note", it is internationally defined by the Convention providing a uniform law for bills of exchange and promissory notes, but regional variations exist. A banknote is frequently referred to as a promissory note, as it is made by a bank and payable to bearer on demand. Mortgage notesare another prominent example.
If the promissory note is unconditional and readily saleable, it is called a negotiable instrument.[2]
Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand of the lender. Usually the lender will only give the borrower a few days' notice before the payment is due.
Promissory notes may be used in combination with security agreements. For example, a promissory note may be used in combination with a mortgage, in which case it is called a mortgage note.
TerminologyEdit
The term note payable is commonly used inaccounting (as distinguished from accounts payable) or commonly as just a "note", it is internationally defined by the Convention providing a uniform law for bills of exchange and promissory notes, but regional variations exist. A banknote is frequently referred to as a promissory note, as it is made by a bank and payable to bearer on demand. Mortgage notesare another prominent example.
If the promissory note is unconditional and readily saleable, it is called a negotiable instrument.[2]
Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand of the lender. Usually the lender will only give the borrower a few days' notice before the payment is due.
Promissory notes may be used in combination with security agreements. For example, a promissory note may be used in combination with a mortgage, in which case it is called a mortgage note.
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