A promissory note is a “promise” of loan payment by an individual to an individual or a bank within the decided deadline. A promissory note is used to make the borrower accountable for paying back the loan amount to a bank or a private lender. They are also used to maintain loan records and for taxation.
A promissory note is short and simple and doesn’t require either party (lender or borrower) to have any legal knowledge to create it. Listed below are a few terms and clauses you might stumble upon in a promissory note:
Acceleration: If a borrower defaults on a provision or does not repay within the specified deadline, the lender has the authority to demand payment of the remaining outstanding dues from the borrower.
Allocation of payment: This term expands on how payments should be made about late fees, interest, and principal.
Attorney’s fees and costs: The borrower has to incur the payments for attorneys and court cases involved if he defaults a loan payment. If, however, the case is won by the borrower, the lender must pay all the related costs.
Non-waiver: If there is a delay or failure to exercise a right mentioned in the note by the lender, it does not imply that they are waiving their right.
Prepayment: This clause elaborates on the rules for paying off a loan before the deadline. This could be for an individual payment or the entire loan amount. In certain agreements, individuals may have to pay a fee even for prepaying a loan.
Waiver of presentments: This clause states that the lender does not have to demand the borrower when the loan is due. The borrower must take the responsibility of making timely loan repayments. The lender must send a notice of non-payment when the borrower misses a deadline. If a borrower still refuses to pay, then the lender can notarize the notice and get on legal proceedings.