What needs to be in a promissory note?

The essentials are: the full names of the lender and borrower, the principal amount borrowed, the interest rate, the repayment terms (lump sum, installments, or on demand), the maturity date or demand mechanism, what counts as default and the consequences, the date, and the borrower's signature. Anything beyond that, like late fees or collateral, is optional but often useful.

Does a promissory note have to be notarized to be valid?

No. A promissory note is enforceable once the borrower signs it, as long as it contains the required terms. Notarization is rarely legally required, but it makes the signature much harder to dispute later, which is why many lenders choose to notarize higher-value notes.

Can I write a promissory note myself?

Yes. A promissory note can be written by the parties themselves and is valid if it includes the essential terms and is signed. The main risks of writing one from scratch are omitting a key term, setting an interest rate above the state usury cap, or using vague repayment language that is hard to enforce.

What is the difference between a secured and an unsecured note?

A secured note is backed by collateral (a car, real estate, business assets) that the lender can claim if the borrower defaults; it needs a collateral description and usually a separate security agreement and lien filing. An unsecured note relies only on the borrower's promise to pay, so it is simpler but riskier for the lender.

Does a promissory note need a witness?

A witness is not required for a promissory note to be valid in most states. Like notarization, a witness signature adds a layer of proof that the borrower signed, which can help if the note is ever challenged. The borrower's signature is the part that actually makes the note enforceable.

How to Write a Promissory Note: What to Include

A promissory note is a written promise to repay money on agreed terms. Done right, it turns a casual loan into something you can actually enforce. Done loosely, it leaves both sides arguing over what was meant. Here is exactly what a promissory note needs, the optional clauses worth adding, and how to keep it enforceable.

The seven essentials every promissory note needs

The parties. Full legal names of the lender (payee) and the borrower (maker), and ideally their addresses.
The principal. The exact amount of money being borrowed.
The interest rate. The annual rate, or a clear statement that the loan is interest-free. The rate must stay under your state usury cap.
The repayment terms. How and when the borrower repays: a single lump sum, fixed installments, or on demand.
Default terms. What counts as default (a missed payment, for example) and what happens next.
The date. The date the note is signed and the loan takes effect.
The borrower's signature. The borrower must sign. This is the part that makes the note enforceable.

Secured or unsecured: decide first

Before drafting, decide whether the loan is backed by collateral.

Unsecured. The note relies only on the borrower's promise to pay. Simpler, but if the borrower defaults the lender has to sue to collect.
Secured. The note is backed by an asset (a car, real estate, business equipment). It needs a description of the collateral, usually a separate security agreement, and a lien filing to make the security enforceable against others.

For help choosing, see secured vs unsecured: when to require collateral and perfecting collateral liens.

Repayment structures

Installment. Fixed periodic payments until the balance is paid off. The most common structure for a planned payback.
Lump sum (term). The full amount plus interest is due on a single maturity date.
Demand. No fixed due date; the full balance is due whenever the lender makes a written demand. See demand vs installment.
Balloon. Small payments during the term, then one large final payment. See balloon payment notes.

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Optional clauses worth adding

Late fee. A modest charge if a payment is late, within your state cap. See late fees and grace periods.
Default interest. A higher rate that applies after default. It counts toward the usury limit, so keep it reasonable.
Acceleration clause. Lets the lender demand the entire balance at once if the borrower defaults. See acceleration clauses.
Prepayment. States whether the borrower may pay early without penalty.
Co-signer or guarantor. A second person who agrees to pay if the borrower does not. See co-signer or guarantor on a note.
Governing law and attorney fees. Names the state whose law applies and whether the loser pays legal costs.

Keep the interest rate legal

Every state caps the interest a private lender can charge, and charging over the cap (usury) can cost you the interest or even the whole debt. Late fees and default interest can count toward the effective rate, so check the all-in number, not just the base rate. Use our Usury Limit Checker and see the maximum legal interest rate by state.

Signing the note

The borrower must sign and date the note. The lender's signature is optional but common. Notarization and witnesses are rarely required, but either one makes the signature much harder to dispute later. Both parties should keep a signed copy, and the lender should keep the original in a safe place, because a lost original can complicate collection. See notarization and witnesses.

Common mistakes to avoid

Setting an interest rate above the state usury cap.
Vague repayment terms (no amount, schedule, or due date).
Charging 0 percent on a family loan without considering the IRS minimum rate. See imputed interest and the AFR.
Calling it secured without describing the collateral or filing the lien.
No signed copy kept by either side.

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