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To us, it’s a legal document that details an agreement about borrowed money between two parties. The one party is called the borrower, and their role is to repay the amount of money listed in the promissory note to the other party, known as the lender. The date on which the financial transaction takes place will also be stated in the promissory note.
Promissory notes are often used for handing out personal loans, solidifying business agreements, and supporting real estate transactions. Within a promissory note, you can find the following terms for repayment:
It’s a legal document that outlines all the terms and conditions for a party to repay multiple loans. A master promissory note (MPN) is often used for student loans in the United States of America. Here are a few types of federal student loans that use MPNs:
A key feature of an MPN is that a party can borrow and repay multiple loans. These loans can exist for many academic years without the need for the student to sign a new promissory note. For example, a student will sign the MPN once, and the document will cover all loans for the duration of the study, which can be up to 10 years.
When it comes to secure and unsecured promissory notes, their major difference is COLLATERAL. Let’s take a look at the table below for a better understanding of the differences between secured and unsecured promissory notes.
It looks like a structured document containing legal and financial information. However, a promissory note will also include custom terms and styles relevant to the business that created it. However, here is what a basic promissory note would likely look like:
As promissory notes serve as agreements of debt a borrower owes and the legal terms to recover losses, it should contain the following key elements:
A promissory note is signed by the borrower and lender. Let’s take a look at these signers in more detail.
The borrower is the person who wants a loan and promises to pay it back to the lender. When they sign the promissory note, they acknowledge that they agree to the terms and conditions in the document. For this reason, the borrower should take note of the payment schedule, interest rates, and the total loan amount.
The second person who can sign the promissory note is the lender, but this is not a requirement in all cases. Most times, the borrower’s signature is enough to start the loan agreement. This is because the borrower is the party promising to repay the loan.
If you want more information on ELECTRONICALLY SIGNING documents like promissory notes, make sure to read our Salesforce e-Sign article.
We already mentioned master, secure, and unsecured promissory notes. But what other types do we get? Let’s take a closer look at the different types of promissory notes.
In this legal document, the borrower promises to repay the lender when they need money to buy real estate. Mortgage promissory notes are used for home purchases and will include the following information:
This legal document is designed for students who need to borrow money to further their education. Like other agerements, the student loan promissory note will include:
Businesses that want to borrow money from an investor, bank, or other financial institution will use a corporate credit promissory note. This type of legal document is often used by businesses when they need short-term loans, money for working capital, or to support expenses. Within a corporate credit promissory note, one will find:
Promissory notes need to be accurate and consistent as they are formal legal documents that follow a particular structure. Creating one from scratch whenever you need it can be a time-consuming task. Even if you had to manually copy data out of a database and paste it into your promissory note, you would need to dedicate time to double-check that your document is free from typical errors like typos, incorrect details, and missing information.
If you want to speed up your promissory note creation process and eradicate errors from your documents, we highly recommend Titan Doc Gen for Salesforce.
With our powerful, no-code app, you can create professional promissory notes with point-and-click tools directly from Salesforce. Working with software can save you hours and weeks from manually creating promissory notes from Salesforce. Here are some of the biggest wins you get from choosing Titan Docs:
These are just a few Titan features to slash your administrative time using no-code automation. For a full feature list, please feel free to contact us.
Thanks for reading our article about what a promissory note is, along with examples. Here at TITAN, we like to learn about business tasks and find the best automation solutions to optimize them for your teams. Then, you get to spend your valuable time on other high-level tasks, like driving business growth.
If there was a topic that we did not cover under promissory notes for Salesforce that you would like to know more about, please contact us through one of our social media channels below. We would be happy to support you with your custom Salesforce solutions.
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Disclaimer: The comparisons listed in this article are based on information provided by the companies online and online reviews from users. If you found a mistake, please contact us.
The elements in a promissory note make it a legal and valid document. Ensure you have these sections in your promissory note to keep it legal:
Promissory notes can be legal documents if they contain the correct requirements.
The lender will read the promissory note and check if there has been any collateral added to the agreement. If there is collateral, the lender can legally seize the asset to make up for the defaulted repayment.
If there is no collateral allocated, the lender can take legal action and use the promissory note as evidence of the loan in the court case.
It still holds and is considered a valid document. The right to collect debt from the borrower is passed to the lender’s beneficiaries or estate.
Yes.
Yes. You can use contract management software like Titan CLM to create and deliver them from Salesforce.
It’s a document that lets the lender convert debt from a borrower into equity, like shares of stock from the borrower’s company. This strategy can be used if the borrower does not have cash to repay the loan. A convertible promissory note is mainly used by startup companies so they can raise money with flexible solutions in the agreement.
They are usually valid for three years after they come into existence. However, it is important to check the laws and regulations of the country and business industry you operate in to determine the exact time.
That would be the lender of the loan.
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