How to write a promissory note

Published 17 October 2026 · Business deals, money and releases

A promissory note is a written promise to repay a debt. It should identify the borrower and lender, the amount advanced, any interest, the repayment schedule and the borrower's signature. Start with the actual arrangement, not a complicated form: a stranger should be able to read the note and work out what is owed and when.

Choose the right document first

A note suits a straightforward promise to pay. A loan agreement can cover a wider set of mutual obligations, conditions, guarantees and security arrangements. The title is not decisive, and a short note is not automatically suitable for a regulated loan or a transaction involving a home.

If the money is genuinely a gift, do not disguise it as a loan. If it is a loan to someone close to you, discuss affordability and missed payments openly before drafting. The guide to lending money to family deals with those relationship and tax questions.

Record names, principal and the advance

Give the full legal names and addresses of the borrower and lender. Where a business borrows, identify the legal entity and the signer's capacity. Do not make an individual a guarantor merely by putting their name beside the company without understanding the effect.

State the principal in a named currency, the date of the advance and how the money is provided. A note signed before funding should not falsely acknowledge receipt of money that has not arrived. Keep the bank-transfer record or other evidence of the actual advance with the signed document. Avoid unnecessary account numbers in copies that will circulate.

Write a schedule that adds up

Choose one repayment method: a single payment on a date, specified instalments, or another clearly defined arrangement. Say when the first payment is due, how frequently payments follow and when the balance must be cleared. “Pay me when you can” is not a useful schedule.

For an interest-free USD 3,000 loan repaid in six equal monthly instalments, each instalment is USD 500. The example below starts on 1 November 2026 and ends on 1 April 2027. The dates are illustrations, not a reason to backdate a real note.

Item	Example term
Principal	USD 3,000
Interest	0% contractual interest, subject to tax review
Instalments	Six payments of USD 500
Due dates	First day of each month, November 2026 to April 2027
Early repayment	Allowed without a contractual penalty

For an interest-bearing loan, use the loan repayment calculator to check the instalments, total interest and final balance. The arithmetic is not a check of legal lending limits.

Explain interest and charges precisely

If interest is charged, state the annual rate, whether it is simple or compounded, the calculation basis and when it begins. Do not write “5% interest” without saying whether that is annual or a flat charge for the whole term. Describe how a payment is allocated between interest, principal and any lawful charges.

Maximum rates, fees and consumer-credit disclosures differ by location. An agreed rate can still be unlawful. Separately, a below-market family loan may have tax consequences: the IRS publishes applicable federal rates for US tax purposes. Those rates are not a universal permission to lend, and tax advice may be needed even for a zero-interest note.

Decide what happens after a missed payment

Set out the due date, any grace period and the notice process. If the lender may demand the entire unpaid balance after default, say when that right arises and whether the borrower gets time to put matters right. Do not assume that missing one payment automatically makes every future payment due.

Keep penalties proportionate and lawful. Collection costs, default interest and acceleration can be restricted by local law. For a first missed payment, a payment reminder letter can record the amount and invite contact without inventing charges. Agree any changed payment schedule in writing and keep it with the original note.

Sample repayment wording

For value received, [Borrower] promises to pay [Lender] the principal sum of
USD 3,000. No contractual interest is charged. The Borrower will pay six monthly
instalments of USD 500, due on the first day of each month from 1 November 2026
through 1 April 2027. Payments will be made by [agreed method]. The Borrower may
repay all or part of the outstanding principal early without a contractual penalty.

This paragraph is only an example of the payment promise. Add the correct parties, advance details, notice terms, governing law and signing requirements. Do not use the illustrative zero rate without considering tax rules and the actual bargain.

Do not treat security as a checkbox

A secured note needs more than a sentence saying “secured by my car.” Identify the asset, ownership and any existing security, and obtain advice about the separate documents, registration or other steps needed to create and protect the security interest. Property lending, guarantees and consumer lending deserve specialist review.

Likewise, do not assume every promissory note is a negotiable instrument that can be transferred in the same way. The UCC source below describes one US framework; the wording and applicable law matter. Check transfer restrictions and who may enforce the debt before using an unfamiliar form.

Sign, fund and keep a payment record

Use the real signing date and meet any required witness or notarisation rules. Give both sides a complete copy. Keep a ledger of the advance, payments, interest and remaining principal, supported by receipts or transfer records. Mark the debt paid when it is discharged and retain evidence of any release of security.

The free promissory note template provides a Word starting point you can download or fill in locally. Review every answer and have important loans checked before signing.

General drafting information, not legal, lending or tax advice. Requirements vary by jurisdiction and transaction.

Sources

Questions

Is a handwritten promissory note valid?

It may be, if it contains the required terms, is properly signed and meets local formalities. Typing it makes names, amounts and dates easier to read, but printing a template does not by itself make the note enforceable.

Does a promissory note need a witness or notary?

Requirements depend on the jurisdiction, the transaction and whether security is involved. A notary is not a substitute for lawful terms. Check the applicable requirements before the borrower signs or money changes hands.

Can a promissory note be interest-free?

Sometimes, but an interest-free loan can still have tax consequences, particularly between family members. Check tax rules and any applicable minimum-interest rules separately from the maximum rate that lending law permits.

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