Promissory Note
Written promise to repay a personal loan — between friends, family, or business associates.
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PROMISSORY NOTE Principal Amount: $10,000.00 Date of Note: May 4, 2026 Maturity Date: May 4, 2029 FOR VALUE RECEIVED, the undersigned John Smith, of 456 Oak Ave, Austin, TX 78701 (the "Borrower"), promises to pay to the order of Jane Doe, of 123 Main St, San Francisco, CA 94103 (the "Lender"), the principal sum of $10,000.00, together with interest as set forth below. 1. INTEREST Interest accrues on the unpaid principal balance at the annual rate of 5% per year, compounded monthly. 2. REPAYMENT Borrower shall pay Lender $299.71 per month, beginning _______________ and continuing on the same day of each month until the principal and all accrued interest are paid in full. 3. PREPAYMENT Borrower may prepay all or any portion of the principal at any time without penalty. Prepayments are applied first to accrued interest, then to principal. 4. DEFAULT The following constitute events of default: (a) failure to make any payment when due that remains uncured for 15 days after written notice; (b) Borrower's bankruptcy, insolvency, or assignment for the benefit of creditors; (c) any breach of this Note that remains uncured for 30 days after written notice. 5. ACCELERATION; LATE FEES Upon default, Lender may declare the entire unpaid balance immediately due and payable. Late payments accrue an additional charge of 5% of the late amount or $25, whichever is greater. 6. COLLECTION COSTS Borrower shall pay all costs of collection, including reasonable attorneys' fees and court costs, incurred by Lender in enforcing this Note. 7. WAIVERS Borrower waives presentment, demand for payment, notice of dishonor, protest, and any other notice except as expressly required by this Note. 8. GOVERNING LAW This Note is governed by the laws of the State of California. 9. ENTIRE AGREEMENT This Note is the entire agreement between Borrower and Lender on its subject and may only be amended in writing signed by both. BORROWER: _____________________________ Date: May 4, 2026 John Smith LENDER ACKNOWLEDGMENT (optional): _____________________________ Date: May 4, 2026 Jane Doe
About this template
A promissory note is the most common document for personal loans between friends, family, or small businesses. It's a one-sided promise (the borrower's promise to repay) — only the borrower needs to sign for it to be legally enforceable. The IRS requires "applicable federal rate" (AFR) interest on family loans over $10,000 — charging zero interest can trigger imputed-interest gift tax issues. As of 2026 the short-term AFR is around 5%, so charging that much keeps things clean. The most-skipped clause is **acceleration**: without it, a missed payment only entitles the lender to that one missed payment, not the entire balance — meaning you have to sue 36 separate times for a 36-month loan in default. Always include the acceleration clause. **Collateral** transforms an unsecured note into a secured note, dramatically improving recovery odds — but secured notes require additional documentation (UCC-1 filing for personal property, deed of trust for real estate) to actually create the security interest.
When to use it
- Loaning money to a friend or family member (always document — money fights destroy relationships).
- Small business loans between owners or to/from outside parties.
- Selling property where the buyer pays over time (seller-financed sales).
- Loans over $10,000 to family — IRS requires AFR interest documentation.
- Any loan amount where you want clear repayment terms enforceable in court.
What to include
- Principal amount, interest rate, and term — the three core economic terms.
- Repayment structure (monthly amortization, interest-only with balloon, lump sum).
- Default definition and acceleration clause.
- Late fee provision (typically 5% or $25, whichever greater).
- Collection costs (attorneys' fees if you have to sue).
- Collateral description if the loan is secured.
- Governing law.