Who is the maker of a promissory note?

The maker is the person who signs the note and promises to pay, usually the borrower. Under the Uniform Commercial Code, a maker is a person who signs or is identified in a note as a person undertaking to pay.

What is the payee on a promissory note?

The payee is the person the note is payable to, usually the lender. If the note is later sold or transferred, a different person may become the holder entitled to enforce it, even though the original payee's name stays on the note.

What is the maturity date of a promissory note?

The maturity date is when the remaining balance is due. An installment note may be paid down over time with the last payment due at maturity, while a balloon note leaves a large final payment due at maturity.

Promissory note terms explained: maker, payee, holder, maturity, and more

Promissory notes use a small set of words over and over, and each one carries a specific meaning. Knowing them makes it much easier to read a note before you sign it, and to spot what is missing.

The people

Maker. The person who signs and promises to pay, usually the borrower. The UCC defines a maker as a person who signs or is identified in a note as a person undertaking to pay.
Co-maker. A second borrower who signs as a maker and is equally responsible. See co-signers and guarantors.
Payee. The person the note is payable to, usually the lender.
Holder. Whoever is entitled to enforce the note now. That's the payee unless the note has been transferred. See who holds the original.
Guarantor. Someone who promises to pay if the borrower doesn't.

The money

Principal. The amount borrowed, or the amount still owed.
Interest rate. The annual percentage charged on the balance. See choosing a rate.
Usury. Charging more interest than the state allows. See maximum legal rates.
Default interest. A higher rate that applies after a default.

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The timing

Maturity date. When the remaining balance is due.
Installment note. Repaid in scheduled payments. See amortization schedules.
Demand note. Due when the lender asks. See demand vs installment.
Balloon payment. A large final payment at maturity. See balloon notes.
Prepayment. Paying early, and whether a penalty applies.

When things go wrong

Default. Failing to pay or keep another promise in the note.
Grace period. Days after a due date before a late fee applies.
Acceleration. A clause letting the lender make the whole balance due after a default. See acceleration clauses.
Collateral. Property that secures the loan. See secured vs unsecured.

Transfers

Negotiable. A note that meets the UCC's tests for easy transfer. See negotiable notes.
Endorsement. The holder's signature transferring the note.
Allonge. A separate page attached to the note to hold endorsements when there's no room on the note itself.
Assignment. Transferring the lender's rights under the note. See selling or assigning a note.

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