A promissory note issued by the Second Bank of the United States, December 15, 1840, for the amount of $1,000.

The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. Sometimes there will be provisions concerning the payee's rights in the event of a default, which may include foreclosure of the maker's assets. Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand of the lender. Usually the lender will only give the borrower a few days notice before the payment is due.^[1]

For loans between individuals, writing and signing a promissory note is often considered a good idea for tax and recordkeeping reasons. In the United States, a promissory note that meets certain conditions is a negotiable instrument governed by Article 3 of the Uniform Commercial Code. Negotiable promissory notes are used extensively in combination with mortgages in the financing of real estate transactions. Other uses of promissory notes include the capitalization of corporate finances through the issuance and transfer of commercial paper.

At various times in history, promissory notes have acted as a form of privately issued currency. In many jurisdictions today, bearer negotiable promissory notes are illegal precisely because they can act as an alternative currency. All Scottish and Northern Irish banknotes are effectively standardized demand promissory notes.

See also

• Bank note
• Treasury note
• Commercial note
• Bond (finance)
• Credit card
• Letter of credit
• Student loan

References

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