Definition of 'Promissory Note'
Promissory notes are considered to be a type of negotiable instrument, which means that they can be transferred from one person to another. This makes them a more liquid asset than other types of debt, such as loans.
Promissory notes typically contain the following information:
* The name of the person or entity who is making the promise to pay (the maker)
* The name of the person or entity who is to receive the payment (the payee)
* The amount of money that is to be paid
* The date on which the payment is to be made
* The interest rate, if any
* Any other terms or conditions of the note
Promissory notes can be either secured or unsecured. A secured promissory note is backed by collateral, such as a car or a house. If the maker of the note defaults on the payment, the creditor can take possession of the collateral. An unsecured promissory note is not backed by collateral, so the creditor has no recourse if the maker defaults on the payment.
Promissory notes can be a useful tool for businesses and individuals to raise money or make payments. However, it is important to understand the terms of the note before signing it, as promissory notes are legally binding documents.
Here are some additional details about promissory notes:
* Promissory notes can be either oral or written. However, written promissory notes are generally preferred, as they provide a more concrete record of the terms of the agreement.
* Promissory notes can be made for any amount of money, but they are typically used for smaller amounts of money than loans.
* Promissory notes can have any maturity date, but they are typically due within one year.
* Promissory notes can be interest-bearing or non-interest-bearing.
* Promissory notes can be either demand notes or time notes. A demand note is payable on demand, while a time note is payable on a specific date.
Promissory notes are a common type of financial instrument, and they can be a useful tool for businesses and individuals to raise money or make payments. However, it is important to understand the terms of the note before signing it, as promissory notes are legally binding documents.
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