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3 Tips To Successfully Make A Simple Promissory Note

Lending money to someone or borrowing money from someone can oftentimes be tricky business.

Although the process of borrowing and lending seems simple, a lot of times, details aren’t ironed out beforehand in regards to when the money will be paid back and how long it will take to pay everything back in total.

For this reason, it’s a good idea to create a simple promissory note. For those who don’t know, a promissory note is a legal document that contains a written promise to pay a certain sum of money to a specific person.

But, in order to create an effective promissory note, you need to know what you’re doing.

Check out this guide to learn the top tips for creating a promissory note.

1. Use a Template

A promissory note doesn’t have to be anything fancy or creative. You just need to state the facts.

To make sure the note includes everything you need, it can help to use a pre-made template to guide you along. This online promissory note template is a good place to start.

2. Understand State and Federal Laws

Before writing a promissory note, you must understand the state and federal laws that apply to borrowing and lending money.

Each state has different laws when it comes to usury limits (the maximum interest rate that can be charged). So, before creating your note, make sure your interest rates fall within your state’s legal limit.

Federal laws are also in place to protect borrowers from unfair practices. Specifically, you should check the fair debts collection act as well as the equal credit opportunity law.

If you plan to collect a promissory note or charge interest on repayment, you will need to get familiar with these laws.

3. Make It Legal

Typing up a promissory note on your computer does not automatically make it legal. Here’s what you need to do to legalize your promissory note:

  • Each party (both the lender and the borrower) need to specify their identities
  • The amount of money being loaned needs to be specified
  • Each party needs to sign the document

Also, if you want to have the option to take the borrower to court in the event they don’t pay you back, you need to make sure that both parties are legally competent when they sign the note. This means that they can’t be a minor, they can’t be under the influence of drugs or alcohol, and they can’t be mentally incompetent.

You also need to make sure there is nothing illegal about the document. In other words, the money borrowed can’t be used to buy illicit goods or services.

Are You Ready to Create a Simple Promissory Note?

Now that you know how to create a simple promissory note, it’s time to get started with yours.

Remember, this is a legal document, so make sure you take your time putting it together and that you have every detail outlined.

And, for more articles like this one, be sure to check back in with our blog.


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The Phat Startup was created by Mike McOwen to create a space where entrepreneur lifestyle could be focused on. We tend to live a different lifestyle than most. Entrepreneurs tend to be interested in maximizing their life, not only their profit.

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PhatStartupsMike McOwen@PhatStartups·
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