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When two people enter into any kind of financial agreement that entails one person being responsible for repaying the other a promissory note should be signed by both parties acknowledging the debt. You can create your own promissory note to handle this situation or you can look online for a promissory note example that you can use to create your own from. This is a considered a legally binding document in most states and can be used in a court of law.

A personal loan like this the perfect promissory note example as it the most common use of one. This type of loan can be between two friends, family members or even business associates. The reason for the loan is not really relevant to the situation, although it can be included on the note if one or both of the parties feel that it is necessary. Making sure you draft a personal payable not or promissory note can prevent any number of misunderstandings from happening and causing unnecessary tension between both parties.

Unlike a simple IOU the promissory note is a legally binding document and can be presented in a court of law as proof of the debt. In many areas banks and other lending institutions require the borrower to sign a promissory note when they borrow money for any purpose. A copy of the note is included with the rest of the paperwork given to the borrower, who should hold onto his copy until the debt is paid in full as it may contain important details about the loan such as interest rate and the original loan amount to be repaid.

When you look at your promissory note example you should see that it has spaces for certain information that is required by law in most states. This includes the names and addresses of both parties involved in the loan, the amount that was borrowed and the true interest rate of the loan. It should also have places to enter the payment amount, frequency of the payments and when the first and last payments are to be made.

You may also see a debt reassignment statement that says the lender can sell or reassign the debt to another party at his discretion as long as the terms of the loan are not affected and finally a place for the signatures of both parties to make it a legally binding document.