What makes a note a "demand note"?

A demand note is payable when the lender requests it. There is no fixed maturity date and no scheduled installments (although the note may include interest payments along the way). The lender can call for full payment at any time by giving written notice as the note specifies.

When should I use a demand note instead of an installment note?

Demand notes work best when timing is uncertain: a family loan to bridge a sale of property, a friend lending to a friend who plans to repay from a future bonus, a business partner advancing capital pending a refinance. They give flexibility but require attention to the statute of limitations.

How does a demand work in practice?

The lender sends a written demand letter referencing the note, identifying the outstanding balance, and demanding payment within a defined notice period (typically 30 days, but follow the note's terms). After the notice period, the full amount is due. If unpaid, the lender can sue.

How does the statute of limitations work on a demand note?

For most demand notes, the statute of limitations begins to run from the date of the note (or the date the loan was made), not from the date of demand. This is counterintuitive: if you wait 8 years to demand on a 6-year statute, your demand may already be too late. Some states have a 10-year tolling period for demand notes; check yours.

How long after demand before I can sue?

After the notice period in your demand letter (typically 30 days). Once that period passes without payment, the borrower is in default and the lender can file suit. Filing too early (before the notice period expires) can result in dismissal.

How should I deliver the demand letter?

Two methods together is the gold standard: certified mail with return receipt requested AND a regular email with read receipt. The note may specify a method; follow it exactly. Hand-delivery with a witness or signed acknowledgment also works. Skip texts, voicemails, and verbal demand for legal purposes.

Can interest accrue on a demand note before demand is made?

Yes, if the note specifies an interest rate. Interest typically accrues from the date of the loan. The borrower may be required to pay interest periodically (quarterly, annually) even though principal is not due until demand. The note defines this.

Can the borrower demand to pay off early?

Generally yes, unless the note prohibits prepayment. Borrowers usually want to be able to pay off when they have funds. Lenders sometimes include a prepayment penalty or short notice period. Most demand notes simply allow free prepayment.

Demand Note: How to Make Demand and Start the Clock

A demand note is the most flexible promissory note format. No fixed maturity, no installment schedule, just a balance owed that comes due whenever the lender asks. Flexibility comes with one trap: the statute of limitations on most demand notes runs from the date of the note, not the date of demand. Wait too long to demand, and you can be barred from collecting on a debt that the borrower never disputed.

What a demand note actually says

A typical demand note includes:

Lender and borrower names and addresses
Principal amount
Date the loan was made
Interest rate (if any) and how interest accrues
Whether interest is paid periodically or accrued and added to balance at demand
Statement that principal is "payable on demand"
Notice period required for demand (typically 30 days)
Method of demand (written, certified mail, etc.)
Default provisions if the borrower fails to pay after demand
Governing state law
Signatures (and notarization if desired)

Why use demand instead of installment

Demand fits when:

The borrower\'s ability to repay depends on a future event (sale of property, year-end bonus, business sale)
The lender wants flexibility to keep the loan outstanding without a fixed end date
A short-term bridge loan where exact repayment timing is unclear
A loan to a family member or friend where formality matters but a fixed schedule does not fit
An advance on services or future earnings where amount and timing are estimable but not exact

Demand fits poorly when the lender wants reliable cash flow (use installment), when the loan amount is high enough that interest payments are critical (use installment with interest schedule), or when the borrower needs a clear end-date for budgeting.

The statute of limitations problem

Here is the rule that catches lenders by surprise. In most states, the statute of limitations on a demand note begins to run from the date of the note, not from the date of demand.

So if your state has a 6-year statute of limitations on written contracts and you sign a demand note in 2026:

Year 5 (2031): demand and you have 1 year to sue if unpaid. OK.
Year 6 (2032): demand and you may already be barred. Trouble.
Year 7+ (2033 and later): demand is too late; the underlying claim has expired.

Some states extend this for demand notes (a 10-year period from the date of the note in a few states) but the conservative rule is: demand within the regular contract limitations period from the loan date.

Use our Statute of Limitations Lookup to see your state\'s specific rule.

How to make a proper demand

Re-read the note. Confirm the required notice period (typically 30 days) and the required method of delivery.
Calculate the outstanding balance. Principal plus accrued unpaid interest, less any payments received.
Write the demand letter. See template below.
Deliver it by the method the note requires. Certified mail with return receipt is the universal default.
Save proof of delivery (the green return-receipt card or USPS tracking record).
Wait the notice period. Do not file suit before it expires.
Send a follow-up reminder a week before the deadline if no response. Keeps the record clean.
If unpaid after the notice period, the borrower is in default. The lender can sue or pursue collection.

Demand letter template

A short, factual letter is enough:

[Date]
[Borrower name]
[Borrower address]

Re: Demand for Payment - Promissory Note dated [Note Date]

Dear [Borrower],

This letter constitutes formal demand under the promissory note we executed on [Note Date] in the original principal amount of $[Amount].

As of [Date], the outstanding balance is:
Principal: $[Principal]
Accrued interest at [Rate]% per annum: $[Interest]
Total due: $[Total]

Pursuant to the terms of the note, full payment is due within thirty (30) days of receipt of this letter, on or before [Deadline Date]. Payment may be made by [check/wire/etc.] to [Address/Account].

Failure to pay by the deadline will be a default under the note, and I will pursue all available remedies including filing suit to collect the amounts owed plus any allowable interest and costs.

I would prefer to resolve this without legal action. Please contact me by [phone or email] if you have questions or wish to discuss payment arrangements.

Sincerely,
[Lender name]
[Address]
[Phone / email]

Common mistakes

Verbal demand only. Almost never enforceable. Always in writing.
Demand by text or social media. Hard to authenticate, often deleted, fails to satisfy "written notice" requirements in most notes.
Filing suit before notice period ends. Premature suit is dismissed; you have to start over.
Waiting too long after the loan to demand. The statute of limitations clock is your enemy on a demand note.
Inconsistent record. If you accepted partial interest payments along the way, document them in the demand letter so the math is clear.

Once demand is made, what changes

Default-rate interest typically begins to apply (if the note provides for one) after the notice period expires
The borrower\'s right to make installment-style partial payments may end; full payment is now due
The lender can file suit immediately after the notice period
The statute of limitations on the new "matured" claim begins to run from the demand deadline (or the original date of the note, depending on state)
Any collateral pledged for the note becomes subject to repossession after default

If the borrower negotiates after the demand

The most common response is the borrower asking for more time, a partial payment plan, or a write-down. Common outcomes:

Forbearance: lender agrees in writing to delay enforcement for a defined period if the borrower meets specific conditions. Useful if the borrower has a real prospect of payment.
Modification: lender and borrower amend the note to change terms (lower rate, longer term, partial principal forgiveness). Document with a written amendment signed by both.
Settlement: lender accepts less than the full amount as final settlement. Document with a written settlement and release of remaining claims.
Foreclosure / repossession: if the loan is secured, the lender exercises remedies on the collateral.

Tools

Statute of Limitations Lookup for state limits
Loan Payoff Calculator for calculating accrued interest and balance
Usury Limit Checker for the rate cap on demand notes

Get the demand note done right

A clean demand promissory note with proper notice, interest accrual, and default provisions makes a future demand straightforward.

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