Promissory Note Template Facts For Protecting Your Money
Do you need to find a legal way to protect yourself when loaning someone money? If you need to load someone some cash, make sure you will get it back by protecting your interests? Try composing a promissory note, these are used by businesses and can also be used by ordinary people to legally bind the transaction?
For example, you want to loan your Uncle Freddy some cash, and you know he’s a nice guy but can you trust him to pay it back on time. You really need to think about putting some terms together to legally protect yourself, but how can you do that without hurting his feelings? After all, he is in the family.
First of all, hurting your Uncle Freddy’s feelings shouldn’t even come into the equation – he will get over it soon enough. You should be more concerned that he doesn’t conveniently forget that money you loaned him. So he probably thinks a simple “IOU” would do the trick, since you are blood relatives, right? Not so fast! There are several things in a promissory note that a simple IOU doesn’t begin to cover.
The basics information contained in a promissory note template will let everyone know exactly what, where, when, and how much your loan is worth. Here are the details that should be contained in any promissory note:
When: the loan date should be contained, so as time passes you won’t forget about when it was actually loaned. Memories sometimes fade, especially when money is involved!
How Much: the amount of the loan must be stated of course, since this is the most important thing you must remember.
Who: This may seem obvious, but if you don’t state who you loaned the money to it is pretty much worthless! And make sure you put Freddy’s full name in there, not just Uncle Freddy.
When: you may want to state when you expect the loan to be paid back, is it on a scheduled basis (weekly or monthly) or lump sum by a certain date? Make sure this is all spelled out.
Interest: if you are going to charge good ol’ Uncle Freddy interest, state the exact amount here on an annualized basis (APR – annual percentage rate) to avoid confusion.
Signature: make sure both parties sign it as well, otherwise it won’t be binding.
In many cases a promissory note template is an unsecured financial instrument, meaning if the person doesn’t pay it back you can’t really go after any assets that the person owns. However, you can attach a lien to the note as well if you want to, stating that if the loan isn’t paid by a certain date, you can come pick up Uncle Freddy’s nice Cadillac in exchange.
Whether you attach a lien or not is up to you, but if it’s a personal loan in most cases none is required. Hopefully you trust a relative enough to pay you back, especially if you have it in writing. Oh, and by the way don’t forget to have Uncle Freddy sign it too. Without a signature, it is not worth the paper it’s written on.
Get these facts right and you won’t have to worry about protecting your money, even if you know that Uncle Freddy is just using it to pay off his gambling debts.