![]() This is the major difference between a Loan Agreement and Promissory Note. But a Promissory Note can not be modified. Use full names (as they appear in identity proofs such as PAN/voter I-cards) and mention the date and place clearly.They let you put as many clauses as you want, such as on collateral, default, termination and inclusion of legal heirs. Loan documents, however, have to be drawn on a stamp paper and notarized.How the interest is calculated (Simple/compounding). Terms of payments should be mentioned.Like at the end of the term, regular periodic payment, regular payments towards interest only (or interest & principal). It should clearly state how borrower will make the payments.A Promissory Note only requires the signature of a borrower, whereas the Loan Agreement should include signatures from both parties.The letter must clearly state “loan agreement” so that it can have legal significance.If you want to have a right to recourse then go for Loan Agreement instead of a Promissory Note.Ī simple Loan Agreement should include the following : A Promissory Note not only acknowledges that there is a Loan but also includes a specific promise to pay.Ī Loan Agreement ( Loan Contract) acknowledges that there is a loan, specific promise to pay and also states that the lender has a right to recourse (the legal right to demand compensation or payment). An IOU document merely acknowledges that a LOAN exists. You may consider getting it notarized as well but it is not mandatory)ĭownload Sample Promissory Note Templates for ” Sample Promissory Note where no time for payment is mentioned”, ” Template for Pro Note made by Joint Promisors”, “Draft P N where repayments are made in installments.”Ī Promissory Note lies somewhere between the informality of an IOU (I Owe You) document and the rigidity of a Loan Agreement. But it is advisable to get it signed by a witness (a person who is not a party of the note. And can be returned to the payee (borrower). ![]() Once the loan is discharged or fully paid off, it should be canceled and marked as “PAID IN FULL”. PN is generally held by the Lender (Issuer).The repayments are generally hand written on the back side of PN document (signed by both the parties). If the borrower pays a part repayment then limitation of 3 years can be from either the date of execution or the last date of payment/acknowledgement whichever is later.There is no limitation or ceiling with respect to the AMOUNT.The Pro Note is valid for only 3 years from the date of execution. You can mention the cheque details in PN note. Try to lend the money by cross A/c cheques.You may also execute the PN note on a Stamp paper if revenue stamps are not available.You can use Re 1/- revenue stamp and get it cross signed by the borrower. When a person issues a promissory note, he/ she would have to stamp it as per the Indian Stamp Act and normally a revenue stamp is affixed on the PN signed by the promissory.The promise to re-pay money and no other conditions should be mentioned in PN.The agreement must state, in writing, the terms of instrument, extent of liability (amount), maker’s and payee’s name and the amount to be paid, among other things. Promissory Note executed in one State may be presented in another State in India with the stamp bearing on the promissory note. ![]()
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