An unsecured promissory note is a financial instrument that documents a borrower’s promise to pay back a loan without any collateral backing the loan. These notes are commonly used in personal loans, business loans, and informal lending arrangements. Below are three diverse examples that illustrate how unsecured promissory notes can be structured for different contexts.
In this scenario, a friend lends money to another friend for an urgent personal expense. A promissory note helps formalize the agreement and ensures clarity about repayment.
John needs $5,000 to cover unexpected medical bills and asks his friend Sarah for help. They agree that John will repay the loan within one year, with no interest. To protect both parties, they draft an unsecured promissory note.
Example of Unsecured Promissory Note:
PROMISSORY NOTE
Date: January 1, 2023
For value received, I, John Doe, residing at 123 Main St, Cityville, State, agree to pay Sarah Smith, residing at 456 Elm St, Cityville, State, the sum of Five Thousand Dollars ($5,000) under the following terms:
This note is unsecured. In the event of default, Sarah has the right to pursue legal action for recovery. This agreement is binding upon both parties.
Borrower’s Signature: ___________________
Lender’s Signature: ___________________
Notes:
A small business owner lends funds to a startup to help them launch their services. This unsecured promissory note provides a clear repayment plan and terms.
Maria, a small business owner, decides to lend $10,000 to a local startup, Tech Innovations, to support their product launch. They agree on a repayment period of two years with a 5% interest rate. The unsecured promissory note formalizes their agreement.
Example of Unsecured Promissory Note:
PROMISSORY NOTE
Date: February 1, 2023
For value received, Tech Innovations, LLC, located at 789 Startup Ave, Cityville, State, promises to pay Maria Johnson, residing at 321 Business Rd, Cityville, State, the sum of Ten Thousand Dollars ($10,000) under the following terms:
This note is unsecured. Maria reserves the right to take legal action in case of default. This agreement is binding upon both parties.
Borrower’s Signature: ___________________
Lender’s Signature: ___________________
Notes:
In this case, a parent provides financial assistance to their child for educational expenses. The unsecured promissory note clarifies the obligations of both parties.
David wants to help his daughter, Emily, pay for college tuition. He agrees to lend her $15,000, which she will repay over five years at an interest rate of 3%. They draft an unsecured promissory note to formalize the loan terms.
Example of Unsecured Promissory Note:
PROMISSORY NOTE
Date: March 1, 2023
For value received, Emily Doe, residing at 111 College St, Cityville, State, agrees to pay David Doe, residing at 222 Family Rd, Cityville, State, the sum of Fifteen Thousand Dollars ($15,000) under the following terms:
This note is unsecured. David has the right to pursue legal action for recovery in case of default. This agreement is binding upon both parties.
Borrower’s Signature: ___________________
Lender’s Signature: ___________________
Notes: