Sometimes, two parties want to borrow or lend money without the need to involve a financial institution. In such situations, a promissory note will formalize the loan and contain the terms of the agreement. Along with the guidance of a qualified lawyer, here are some factors to keep in mind before using a promissory note. 

Why Would You Need a Promissory Note?

Sometimes called an IOU or note payable, a promissory note is a legal document that contains the promise of the borrower to repay a certain amount to the lender within a given time frame. As long as the note satisfies relevant legal requirements, it will be enforceable, and the borrower is legally obliged to repay the loan.

Some of the most common types of promissory notes are commercial, personal, investment, and real estate. You can use a promissory note for various financial transactions, such as loans for cars, college tuition, and personal projects.

Both lender and borrower can benefit from this debt instrument. Not only does it give the assurance that lenders can get their money back, but it also contains the rights of borrowers.

Most of the time, you will come across a promissory note when taking out a small personal loan. Seek the advice of a lawyer to determine if this legal instrument is appropriate for your situation.

What Makes a Promissory Note Valid?

A promissory note must be a written contract to be valid and enforceable. For every state, the notes more or less follow the same form, with some key differences like the loan amount and contract terms.

Generally, a promissory note must contain the terms and amount of repayment, interest amount, and details addressing the issue of default payment. The borrower should affix their signature on the document for the agreement to be valid.

Working with a lawyer will make drafting an enforceable promissory note easier, and you will have a professional on your side who can discuss available legal recourse if the need arises.

When you need assistance with legal documents like promissory notes, turn to the Law Offices of Reuben S. F. Wong in Honolulu, HI. They provide top-notch legal advice and representation, whether your concern involves business law, real estate law, or estate planning. Call their office today at (808) 531-3526 or visit their website to schedule a free consultation.