Essentially, promissory notes are instruments that facilitate the borrowing of money from one party to another. Promissory notes usually set out the key terms of the loan, such as when and how the funds will be repaid at any one time.
Promissory notes are often used in business settings but can also be used when someone makes a personal loan. Outlined below are some of the critical components of these instruments.
Unsecured versus secured promissory notes
A secured promissory note is an agreement that is backed up by collateral, such as real estate or other property belonging to the borrower. This collateral can be a means for the lender to recuperate some money if they violate the note’s terms.
On the other hand, an unsecured promissory note is not backed up by collateral. Therefore, the lender does not have any automatic recourse in the event that the agreement is breached. However, lenders will still be able to apply to the court to seek remedies.
What information should be included in promissory notes?
Promissory notes generally include key information such as the contact details of both borrower and lender, the principal sum, the due date, and information on late fees and interest. Additionally, it is generally good practice for the agreement to be witnessed by a third party. The document should also state who is responsible for paying legal fees if they are required.
Being familiar with Florida statutes relating to lending practices could be beneficial to both borrowers and lenders. If you are involved in a business dispute that concerns the collection of assets or finances, it is important to know that you have legal rights.