Examples of Simple Promissory Notes

Explore practical examples of simple promissory notes for various situations.
By Taylor

Understanding Simple Promissory Notes

A promissory note is a written promise to pay a specified amount of money to a designated person at a defined time. These documents are crucial in personal and business transactions, ensuring clarity and legal protection for both the lender and borrower. Here are three diverse examples of simple promissory notes that anyone can use.

Example 1: Personal Loan Between Friends

In this scenario, two friends decide to help each other out. One needs money for a car repair and the other is willing to lend it.

Context: When lending money to friends, having a written agreement helps avoid misunderstandings.

Promissory Note:
Date: October 1, 2023
Borrower: John Doe
Lender: Jane Smith
Loan Amount: $500
Terms: John agrees to pay back the $500 in full by December 1, 2023.
Interest Rate: 0%
Signature of Borrower: ___________________
Signature of Lender: ___________________

Notes: It’s friendly to keep the interest rate at 0% for personal loans, but always communicate clearly about repayment expectations.

Example 2: Business Loan for Startup Costs

A small business owner needs to borrow money to cover initial costs for their new café, and they secure a loan from a family member.

Context: This formalizes the loan and protects both parties, especially when the amount is substantial.

Promissory Note:
Date: October 1, 2023
Borrower: Emily Johnson
Lender: Michael Johnson
Loan Amount: $5,000
Terms: Emily agrees to repay the loan in two installments of $2,500 each on January 1, 2024, and April 1, 2024.
Interest Rate: 5% per annum, calculated annually.
Total Amount Due by April 1, 2024: $5,250
Signature of Borrower: ___________________
Signature of Lender: ___________________

Notes: Consider including a clause about late payments, which provides a clear course of action if the borrower fails to pay on time.

Example 3: Loan for Home Improvements

A homeowner wants to renovate their kitchen and borrows money from a neighbor who is willing to help.

Context: Using a promissory note ensures both parties are on the same page regarding the loan details.

Promissory Note:
Date: October 1, 2023
Borrower: Sarah Lee
Lender: Tom Brown
Loan Amount: $3,000
Terms: Sarah agrees to repay the full amount by October 1, 2024.
Interest Rate: 3% per annum, paid in monthly installments.
Monthly Payment Amount: $258.00
Signature of Borrower: ___________________
Signature of Lender: ___________________

Notes: It’s helpful to calculate monthly payments upfront to avoid confusion later on. Consider including a prepayment option if the borrower wants to pay off the loan early without penalties.