Simple Promissory Notes That Actually Make Sense

Why a “Simple” Promissory Note Isn’t Just a Fancy IOU

Let’s start with the honest truth: most people only think about promissory notes when something has already gone wrong. A loan wasn’t repaid, a deal fell apart, or a friendship got weird. That’s a shame, because a simple promissory note is easiest to create before there’s any drama.

At its core, a promissory note is just this in writing:

• I (the borrower) promise to pay you (the lender)
• This amount of money
• On these dates or schedule
• With this interest (or none)

That’s it. Everything else is just detail and clarity. The law doesn’t require it to be poetic. It just needs to be clear enough that a judge, months or years later, can read it and say, “I understand who owes what, and when.”

So instead of staring at legal templates that feel like they were written for a bank in 1973, let’s walk through some everyday-style examples you can actually understand.

The Anatomy of a Simple Promissory Note (Without the Jargon)

Before we dive into different situations, it helps to see the basic building blocks that keep showing up:

• Date and place – When and where the note is signed.
• Names and addresses – Who is borrowing, who is lending, and how to find them.
• Principal amount – The exact amount borrowed.
• Interest (if any) – The rate, or a clear statement that there is no interest.
• Payment terms – Due date or payment schedule.
• Late fees or consequences – What happens if payments are late or missed.
• Signatures – Borrower signs; lender often signs too. Sometimes a witness or notary.

Once you recognize these pieces, every example you see will start to feel familiar instead of intimidating.

A Friendly Loan That Stays Friendly

Imagine Maya. She lends her cousin Alex $2,000 to help with moving costs. They trust each other, but Maya has been burned before by “I’ll pay you back soon” promises. This time, she wants something in writing—but not a 10-page contract.

Here’s how a very simple personal loan promissory note between family might look:

Simple Promissory Note – Personal Loan
Date: March 10, 2025
Location: Austin, Texas

Borrower: Alex Ramirez, 123 Oak Street, Austin, TX 78701
Lender: Maya Johnson, 456 Pine Avenue, Austin, TX 78702

For value received, I, Alex Ramirez ("Borrower"), promise to pay Maya Johnson ("Lender") the principal sum of Two Thousand Dollars ($2,000.00).

1. Payment Due Date
The full principal amount of $2,000.00 is due and payable on or before September 10, 2025.

2. Interest
This loan is interest-free. No interest will accrue on the unpaid balance.

3. Method of Payment
Payment will be made by cash, check, or electronic transfer to an account designated by Lender.

4. Late Payment
If Borrower does not pay the full amount by the due date, Borrower agrees to discuss a new payment plan with Lender in good faith and understands that Lender may take legal action to collect the unpaid amount.

5. Governing Law
This Note is governed by the laws of the State of Texas.

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Alex Ramirez, Borrower

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Maya Johnson, Lender

Is this perfect “lawyer language”? No. Does it clearly say who owes what, by when, and under which state’s law? Yes. And for many personal loans, that’s actually good enough.

Notice how this one skips interest completely. For family loans, that’s pretty common. But there’s a hidden risk: in the U.S., the IRS has rules about interest on certain personal loans. If you’re dealing with larger amounts, it’s worth checking the IRS guidance on below-market loans: https://www.irs.gov.

When You Want Installments Instead of One Big Payment

Now meet Jordan. He borrows $5,000 from his friend Brianna to start a small landscaping side business. Paying it all back at once in six months? Not happening. He needs monthly payments.

Here’s how a simple installment promissory note might read:

Installment Promissory Note
Date: May 1, 2025
Location: Denver, Colorado

Borrower: Jordan Lee, 789 Maple Street, Denver, CO 80203
Lender: Brianna Carter, 321 Birch Lane, Denver, CO 80204

For value received, I, Jordan Lee ("Borrower"), promise to pay Brianna Carter ("Lender") the principal sum of Five Thousand Dollars ($5,000.00), plus interest as stated below.

1. Interest Rate
Interest will accrue on the unpaid principal at a rate of 5% per year, calculated on a simple interest basis.

2. Payment Schedule
Borrower will make 12 monthly payments of $428.04 each, beginning on June 1, 2025, and on the 1st day of each month thereafter, until the full principal and interest are paid in full.

3. Place and Method of Payment
Payments will be made by electronic transfer to Lender’s designated bank account or by check mailed to Lender’s address listed above.

4. Late Fees
If any payment is more than 10 days late, Borrower will pay a late fee of $25.00 for that missed payment.

5. Prepayment
Borrower may prepay all or part of the outstanding balance at any time without penalty. Any prepayment will first be applied to any late fees, then to accrued interest, then to principal.

6. Default
If Borrower fails to make any payment within 30 days of its due date, Lender may declare the entire remaining balance immediately due and payable.

7. Governing Law
This Note is governed by the laws of the State of Colorado.

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Jordan Lee, Borrower

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Brianna Carter, Lender

Here, the note does a few extra things:

• Spells out a specific interest rate.
• Uses a fixed monthly payment.
• Mentions prepayment so Jordan can pay it off faster if business goes well.
• Includes a clear default clause.

If you’re wondering how to actually calculate those monthly payments, sites like community college business departments or university finance labs often have free loan calculators. A good starting point: https://www.missouristate.edu/FinancialAid/calculators.htm (Missouri State University’s tools are pretty user-friendly).

A Used Car, a Handshake… and a Simple Note

Let’s say Sam is selling his old car to DeAndre for \(4,500. DeAndre can’t pay it all at once but can manage \)500 per month. They could do a handshake deal and hope for the best. Or they can write a simple promissory note tied to the car.

Here’s what that might look like:

Promissory Note for Vehicle Purchase
Date: August 15, 2025
Location: Columbus, Ohio

Borrower/Buyer: DeAndre Miller, 55 Grove Street, Columbus, OH 43215
Lender/Seller: Samuel (Sam) Torres, 98 Lakeview Drive, Columbus, OH 43214

For value received, I, DeAndre Miller ("Borrower"), promise to pay Samuel Torres ("Lender") the principal sum of Four Thousand Five Hundred Dollars ($4,500.00) for the purchase of the following vehicle:

Vehicle: 2015 Honda Civic, VIN 2HGFB2F50FH123456, approximately 120,000 miles, gray.

1. Down Payment
Borrower will pay Lender $500.00 on August 15, 2025, as a down payment.

2. Remaining Balance and Payments
The remaining balance of \(4,000.00 will be paid in 8 monthly installments of \)500.00 each, due on the 15th day of each month, beginning September 15, 2025.

3. Interest
This loan is interest-free. No interest will accrue on the unpaid balance.

4. Title and Ownership
Lender will transfer title to Borrower upon receipt of the full purchase price of $4,500.00. Until then, Lender will retain title as security for payment. Borrower will have possession and be responsible for insurance, registration, and any tickets or fines.

5. Late Payments and Default
If any payment is more than 10 days late, Borrower will pay a late fee of $20.00. If Borrower is more than 30 days late on any payment, Lender may treat this Note as in default and may repossess the vehicle as allowed by Ohio law.

6. Governing Law
This Note is governed by the laws of the State of Ohio.

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DeAndre Miller, Borrower/Buyer

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Samuel Torres, Lender/Seller

This version sneaks in a very simple form of security: Sam keeps the title until he’s fully paid. That’s not a full-blown auto finance contract, but it’s a lot better than “Just pay me when you can.”

If you’re in the U.S., it’s smart to check your state’s DMV or BMV website for rules on private car sales and title transfers. For example, the Federal Trade Commission has a handy overview on car buying and financing: https://www.consumer.ftc.gov.

When a Small Business Borrows From an Individual

Now let’s move into slightly more formal territory. Picture a small bakery, “Sunrise Breads LLC,” borrowing $15,000 from a retired neighbor, Mr. Harris, to buy a new oven. This isn’t just a friend helping out; this is a business loan.

Their simple business promissory note might look like this:

Business Promissory Note
Date: January 5, 2026
Location: Portland, Oregon

Borrower: Sunrise Breads LLC, 200 Market Street, Portland, OR 97201
Lender: Thomas Harris, 890 River Road, Portland, OR 97202

For value received, Sunrise Breads LLC ("Borrower") promises to pay Thomas Harris ("Lender") the principal sum of Fifteen Thousand Dollars ($15,000.00), plus interest as stated below.

1. Interest Rate
Interest will accrue on the unpaid principal at a rate of 7% per year, calculated on a simple interest basis.

2. Term and Payments
This Note will be repaid over 36 months in equal monthly installments of $463.16, beginning on February 5, 2026, and on the 5th day of each month thereafter, until the principal and interest are paid in full.

3. Security (Optional)
This Note is [secured/unsecured]. If secured, Borrower grants Lender a security interest in the bakery’s commercial oven and related equipment. The parties agree to sign any additional documents required to perfect Lender’s security interest under Oregon law.

4. Late Fees
If any payment is more than 10 days late, Borrower will pay a late fee of $50.00 for that payment.

5. Default and Acceleration
If Borrower fails to make any payment within 30 days of its due date, or if Borrower becomes insolvent or files for bankruptcy, Lender may declare the entire remaining balance immediately due and payable.

6. Prepayment
Borrower may prepay all or part of the outstanding balance at any time without penalty.

7. Personal Guarantee (If Used)
The undersigned owner, Emily Chen, personally guarantees payment of this Note.

8. Governing Law
This Note is governed by the laws of the State of Oregon.

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Sunrise Breads LLC, Borrower
By: Emily Chen, Managing Member

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Thomas Harris, Lender

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Emily Chen, Personal Guarantor (if applicable)

Here the note starts to look more “grown-up,” but the structure is still familiar:

• Clear interest rate and term.
• Security language if the lender wants collateral.
• Optional personal guarantee from the owner.

If you’re dealing with a business loan, it’s worth skimming some basic small business law resources. The U.S. Small Business Administration has free guides on borrowing and contracts: https://www.sba.gov.

A Very Bare-Bones One-Page Note (And Why It’s Risky)

Every now and then, someone wants the shortest possible version. Something like this:

Short Form Promissory Note
Date: April 1, 2025

I, Chris Walker, promise to pay Dana Lopez the sum of One Thousand Five Hundred Dollars ($1,500.00) on or before July 1, 2025.

This loan is interest-free.

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Chris Walker, Borrower

That’s it. No address, no governing law, no late fees, no payment method.

Does it say who, what, and when? Yes. Is it better than nothing? Absolutely. But if there’s a dispute—say Chris claims he already paid cash—you suddenly wish you had a bit more detail:

• How payment must be made.
• Where to send it.
• What happens if the due date is missed.

So while it’s tempting to keep it ultra-short, adding a few extra lines gives you a lot more protection without making the document scary.

Should You Get a Witness or Notary?

In many U.S. states, a promissory note does not have to be notarized to be enforceable. A signed note is usually enough. But a notary or witness can make life easier later if someone claims, “That’s not my signature.”

A few quick guidelines:

• For small personal loans between people who trust each other, a simple signed note is often fine.
• For larger loans, long repayment periods, or business deals, a notary is a smart extra step.
• Some states have specific rules for certain types of notes or secured loans. When in doubt, check your state court or bar association website. The Legal Information Institute at Cornell Law School has a good starting point: https://www.law.cornell.edu.

Common Mistakes These Examples Help You Avoid

Looking back at all these examples, they quietly solve a bunch of problems that show up in real life:

• Vague promises like “I’ll pay you back when I can” are replaced with clear dates and amounts.
• Missing interest terms are avoided by either stating a rate or clearly saying “interest-free.”
• No backup plan for late payments is replaced with simple late fee and default language.
• No link to the thing being sold (like a car) is fixed by describing the vehicle in the note.

If you’re thinking, “But what if my situation doesn’t fit any of these exactly?”—that’s normal. These are models, not handcuffs. You can adjust:

• Change the dates and amounts.
• Add or remove interest.
• Turn a lump-sum payment into monthly installments.
• Add a line about collateral or a personal guarantee if needed.

The goal is clarity, not perfection.

Quick FAQ About Simple Promissory Notes

Do I really need a promissory note if I trust the other person?

You trust them now. The note isn’t about distrust; it’s about memory and clarity. People forget details, circumstances change, and misunderstandings pop up. A short, clear note protects both sides and often prevents arguments.

Is a promissory note legally binding without a lawyer?

In many cases, yes—if it clearly states the key terms (who, what amount, when, and how) and is signed by the borrower. That said, for large amounts or complicated deals, talking to a lawyer is a wise move. Many law school clinics and legal aid organizations offer low-cost help; you can search via the Legal Services Corporation: https://www.lsc.gov.

What’s the difference between a promissory note and a contract?

A promissory note focuses on one main promise: repayment of money. A contract can cover a much wider range of obligations. In practice, a promissory note is a type of contract, just a very focused one.

Can I charge any interest rate I want?

Not quite. Every state has usury laws that limit how high interest rates can go. If you set a rate that’s too high, a court might reduce it or throw it out. For general background on consumer credit and interest limits, the Consumer Financial Protection Bureau is a good resource: https://www.consumerfinance.gov.

Should I keep a copy, or is the signed original enough?

Keep copies—digital and paper if you can. Both sides should have a copy, and it’s smart to save proof of each payment (bank records, receipts, screenshots). If there’s ever a dispute, that paper trail matters just as much as the note itself.

If you use the examples above as a starting point and stay honest and specific about the terms, you’ll end up with a promissory note that’s clear, readable, and actually useful—without feeling like you accidentally became a corporate lawyer overnight.