Promissory note.
In plain English
A promissory note is a written document in which one party promises to pay a specific sum to another, on demand or by a set date, under agreed terms. It usually states the amount borrowed, the interest rate, the payment schedule, and what happens if you do not pay. It is the core legal record that a debt exists and is enforceable in court. You sign one for mortgages, student loans, personal loans between family members, and many other borrowing arrangements, even when you do not realize that is what the document is called.
01Why it matters
Signing a promissory note legally binds you to the exact terms written on it, so the numbers and dates on that page, not a verbal agreement, are what a court will hold you to.
02The math, step by step
Your aunt lends you $5,000 for a car. A simple promissory note states the $5,000 amount, a 3 percent interest rate, $150 monthly payments, and a final due date. Once you both sign, that note is the enforceable record. If a dispute ever arises, the signed note settles what was agreed, not anyone's memory of the conversation.
03What this is NOT
A promissory note is not a casual IOU. An IOU just acknowledges a debt exists. A promissory note adds enforceable terms (amount, rate, schedule, consequences) and a signature, which is why courts treat it as binding.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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