Practical examples of promissory note examples with interest

Simple fixed-rate examples of promissory note examples with interest

Let’s start with the kind of real example you’d actually email to a friend or family member when you lend money. This is a fixed-rate, straightforward personal loan.

Example 1 – Personal loan, fixed interest, monthly payments
Principal Amount: $5,000
Interest Rate: 6% per year, fixed
Date: March 1, 2025

For value received, I, Jordan Smith ("Borrower"), promise to pay to Alex Rivera ("Lender") the principal sum of Five Thousand Dollars ($5,000), together with interest on the unpaid principal balance at the fixed rate of six percent (6%) per year.

Payments of $193.33 shall be due on the first day of each month, beginning April 1, 2025, and continuing until March 1, 2027, when all outstanding principal and accrued interest shall be due and payable in full.

If any payment is more than 10 days late, Borrower will pay a late fee of $25. Borrower may prepay all or any part of the principal at any time without penalty.

This is one of the best examples of a plain-language personal promissory note with interest. It clearly states:

• Principal amount
• Interest rate and that it’s fixed
• Payment amount and schedule
• Late fee and prepayment rights

When people search for examples of promissory note examples with interest, this is exactly the kind of wording they’re usually trying to find.

Amortized examples of promissory note examples with interest for longer loans

For larger or longer-term loans, payments are often amortized—spread out so each payment includes both principal and interest. Here’s an example of a three‑year amortized loan between individuals.

Example 2 – Three‑year amortized loan between friends
Principal Amount: $15,000
Interest Rate: 7% per year, fixed
Term: 36 months

For value received, Borrower promises to pay Lender the principal sum of Fifteen Thousand Dollars ($15,000), with interest at the fixed rate of seven percent (7%) per year on the unpaid principal balance.

Borrower shall make 36 equal monthly payments of $463.16, due on the 15th day of each month, beginning May 15, 2025. Each payment will be applied first to accrued interest and then to principal.

This Note is fully amortizing; if all payments are made as scheduled, the Note will be paid in full on April 15, 2028.

This example of an amortized promissory note with interest mirrors how banks structure consumer loans. The language “applied first to accrued interest and then to principal” is standard and avoids arguments about how payments are allocated.

If you want to check payment amounts or interest calculations, you can use online loan calculators from reputable sources, such as the Consumer Financial Protection Bureau (CFPB) or financial education tools from federal or university sites.

Balloon payment examples include higher risk and need clear wording

A balloon payment note keeps early payments low but requires a large lump sum at the end. These can be risky for borrowers if they don’t plan ahead, which is why the balloon amount and due date must be spelled out.

Example 3 – Small business balloon note with interest
Principal Amount: $50,000
Interest Rate: 8.5% per year, fixed
Term: 60 months (5 years)

Borrower promises to pay Lender the principal sum of Fifty Thousand Dollars ($50,000), with interest at the fixed rate of eight and one‑half percent (8.5%) per year on the unpaid principal balance.

Borrower shall make 59 monthly payments of interest only, in the amount of \(354.17 each, due on the first day of each month, beginning July 1, 2025. On June 1, 2030 (the “Maturity Date"), Borrower shall pay in full the entire unpaid principal balance of \)50,000, together with all accrued but unpaid interest.

Borrower may prepay principal at any time in increments of at least $1,000 without penalty.

As of 2024–2025, balloon structures show up frequently in short‑term business financing and some real estate deals, especially where borrowers expect to refinance or sell before the balloon is due. This is one of the best examples to study if you’re drafting a business promissory note with interest and a balloon feature.

Variable interest examples of promissory note examples with interest

Fixed rates are easy to understand, but some notes use variable interest rates tied to an index, like the prime rate published by major banks. When you look for real examples of promissory note examples with interest that float with the market, the language tends to follow a predictable pattern.

Example 4 – Variable rate promissory note tied to prime
Principal Amount: $30,000
Interest Rate: Variable

Interest on the unpaid principal balance shall accrue at a variable rate equal to the “Prime Rate” as published in The Wall Street Journal, plus two percent (Prime + 2.00%), adjusted on the first day of each calendar quarter.

If the Prime Rate is no longer published, Lender shall select a comparable replacement index in good faith.

Borrower shall make monthly payments of accrued interest, due on the last day of each month, beginning February 29, 2025. Unless renewed in writing, all outstanding principal and accrued interest shall be due and payable in full on January 31, 2027.

Variable‑rate notes became more visible again after 2022, as interest rates climbed. As of 2024–2025, many small lenders and private parties still prefer fixed rates for simplicity, but if you want your note to track market conditions, this example of variable interest language is a solid starting point.

For background on how interest rates and benchmarks work in the broader economy, the Federal Reserve provides detailed explanations and current policy information at federalreserve.gov.

Short‑term, high‑interest examples include clear late fee language

Sometimes the loan is short, the risk is higher, and the interest rate reflects that. In those cases, the note should be very explicit about the rate, late fees, and what happens if the borrower misses payments.

Example 5 – Short‑term bridge loan with higher interest
Principal Amount: $8,000
Interest Rate: 15% per year, fixed
Term: 12 months

Borrower promises to pay Lender the principal sum of Eight Thousand Dollars ($8,000), together with interest at the fixed rate of fifteen percent (15%) per year on the unpaid principal balance.

Borrower shall make 12 equal monthly payments of $723.29, due on the 10th day of each month, beginning August 10, 2025.

Any payment not received within 5 days of the due date shall incur a late fee equal to the greater of $35 or 5% of the overdue amount.

Interest shall continue to accrue on any past‑due amounts until paid in full.

This is a realistic example of a promissory note with interest where the rate is high enough that consumer protection laws may come into play, depending on your state or country. Before using a structure like this, it’s wise to review state usury laws and consumer credit rules. The Federal Trade Commission (FTC) and CFPB both publish educational materials on lending practices and consumer rights.

Installment sale examples of promissory note examples with interest

Promissory notes with interest are also used in installment sales, where the buyer pays over time instead of all at once. Think of someone selling a used truck or a piece of equipment and agreeing to be paid back monthly.

Example 6 – Installment sale of equipment with interest
Purchase Price / Principal: $12,000
Down Payment: $2,000
Amount Financed under Note: $10,000
Interest Rate: 9% per year, fixed

In connection with the sale of one (1) 2021 Ford F‑150, Seller ("Lender") agrees to finance Ten Thousand Dollars (\(10,000) of the purchase price. Buyer ("Borrower") promises to pay Lender the principal sum of \)10,000, with interest at the rate of nine percent (9%) per year on the unpaid principal balance.

Borrower shall make 24 monthly payments of $456.88, due on the 5th day of each month, beginning September 5, 2025.

Borrower grants Lender a security interest in the vehicle described above until this Note is paid in full. If Borrower fails to make any payment within 15 days after its due date, Lender may declare the entire unpaid balance immediately due and may exercise all rights of a secured creditor under applicable law.

This example of a promissory note with interest shows how collateral gets folded into the language. It’s not just about interest; it’s about what the lender can do if the borrower stops paying.

For a deeper understanding of secured transactions and how security interests work, many law schools publish open course materials. For example, you can explore commercial law resources from universities like Harvard at harvard.edu and other .edu sites that offer public-access legal education content.

Student or family education loan examples include flexible terms

Family loans for education expenses are increasingly common as tuition continues to rise. These often use interest rates lower than private student loans but still include interest so the arrangement feels fair to both sides.

Example 7 – Family education loan with grace period
Principal Amount: $20,000
Interest Rate: 4% per year, fixed

For value received, Borrower promises to pay Lender the principal sum of Twenty Thousand Dollars ($20,000), together with interest at the fixed rate of four percent (4%) per year on the unpaid principal balance.

No payments shall be due while Borrower is enrolled at least half‑time in an accredited college or university. Interest will accrue during this in‑school period and will be added to principal once Borrower is no longer enrolled at least half‑time.

Beginning six (6) months after Borrower is no longer enrolled at least half‑time, Borrower shall make 120 monthly payments of $202.49 until this Note is paid in full.

If you’re comparing this to formal student loans, official information on federal student aid and repayment options is available at studentaid.gov, a U.S. Department of Education site.

Key clauses to watch in real examples of promissory note examples with interest

As you compare these real‑world examples of promissory note examples with interest, certain clauses repeat because they solve common problems. When you draft or review a note, pay particular attention to:

Interest rate wording
Make sure the rate is clearly stated as a yearly (annual) rate, and specify whether it’s fixed or variable. If it’s variable, you need:

• The index (for example, “Prime Rate as published in The Wall Street Journal")
• The margin (for example, “Prime + 2.00%")
• How often the rate adjusts

Payment schedule
The best examples spell out:

• How often payments are due (monthly, quarterly)
• The calendar day payments are due
• Whether payments are interest‑only, principal plus interest, or fully amortized

Late fees and default
Real examples include:

• A grace period (for example, 5–15 days)
• A flat or percentage late fee
• A statement of what counts as default (for example, failure to pay, bankruptcy, or violation of other terms)

Prepayment
If the borrower might want to pay off early, the note should say whether there is a prepayment penalty or whether prepayment is allowed without penalty. Most personal notes allow free prepayment.

Governing law and jurisdiction
Because laws vary, most examples of promissory note examples with interest end with a short clause such as:

This Note shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflict of laws rules.

This matters if a dispute arises and the parties end up in court or arbitration.

2024–2025 trends affecting promissory notes with interest

If you’re writing a note today, you’re not doing it in a vacuum. A few current trends shape how people structure interest:

Higher base rates compared with the 2010s
After years of very low interest rates, the rate environment shifted sharply starting in 2022. As of 2024–2025, many private lenders and individuals set rates somewhere between current savings rates and typical credit card rates, to balance fairness with risk.

More attention to written terms
With economic uncertainty and higher borrowing costs, more people want clear, written agreements—even for loans between friends or family. That’s why demand for real‑world examples of promissory note examples with interest has grown: people want language they can understand and trust.

Use of digital signatures and online storage
It’s now common to sign promissory notes electronically, provided local law allows it. In the U.S., the ESIGN Act and similar state laws generally recognize properly executed electronic signatures, but you still need to keep a copy of the signed note in a secure, backed‑up location.

FAQ: examples of promissory note examples with interest

Q: Can you give a simple example of a promissory note with interest between friends?
A: Yes. A straightforward example of a promissory note with interest would say something like: “I promise to pay you \(2,000 plus 5% interest per year, in 24 equal monthly payments of \)87.71, due on the first of each month, starting next month.” Then you add names, dates, signatures, and a short late fee clause.

Q: Do all promissory note examples include interest, or can the rate be 0%?
A: A promissory note can have a 0% interest rate, but then it’s simply a promise to repay the principal. Many people still prefer to charge modest interest so the value of the money keeps up, at least somewhat, with inflation. Tax rules in some countries also treat very low or 0% family loans differently, so it’s smart to check local guidance or talk with a tax professional.

Q: What are the best examples of promissory note examples with interest for small businesses?
A: For small businesses, the best examples usually resemble Example 3 (balloon note) or a fully amortized structure similar to Example 2, but with clearer default and security language. They often include collateral (equipment, inventory, or receivables), a higher interest rate than typical bank loans, and specific remedies if the business misses payments.

Q: How do I know if the interest rate in my note is legal?
A: Every jurisdiction has its own usury laws that cap interest rates. In the U.S., those caps are often set at the state level and may differ for consumer versus business loans. To check, look up your state’s statutes on interest and usury, or consult a local attorney. The Federal Reserve and FTC provide general background on consumer credit, but you’ll still need state‑specific rules.

Q: Does a promissory note with interest need to be notarized?
A: Not usually. A promissory note is generally enforceable if it’s in writing, clearly states the promise to pay, includes the key terms, and is signed by the borrower. Some lenders prefer notarization to reduce disputes about authenticity, and certain secured or real‑estate‑related notes may need notarization or recording under local law.

Final thoughts

When you study these real‑world examples of promissory note examples with interest, you’ll notice they all do the same basic things: state the amount, describe the interest, explain how and when payments happen, and spell out what occurs if something goes wrong. From there, you can adjust the language to match your situation—personal, business, installment sale, or education‑related.

If the dollar amounts are large or the relationship is sensitive, consider having a local attorney review your draft. A short legal review now is usually cheaper than a long dispute later.