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Personal Loan Promissory Note, Explained

What Is a Personal Loan Promissory Note?
Jason Steele
Jason SteeleUpdated March 2, 2023
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A promissory note is a legal document that outlines the repayment terms of a loan. The promissory note includes details about the loan, such as the principal amount, interest rate, and repayment terms. After signing a promissory note, a borrower is legally obligated to repay the loan according to the terms. Read on to learn more about promissory notes. 

How Does a Personal Loan Promissory Note Work?

A personal loan promissory note legally documents a loan. It can help protect the lender if the borrower doesn’t repay the loan. Promissory notes include the terms and conditions of the loan, the time frame for repaying the loan, and any interest that may accrue over the life of the loan. A promissory note for a personal loan can be secured or unsecured. Like collateralized loans, secured promissory notes require the borrower to put up collateral for the loan. The lender can seize that collateral if the borrower fails to make payments. Unsecured promissory notes don’t require collateral. 

When Is a Personal Loan Promissory Note Used?

A promissory note can be used in almost any situation where a person or institution lends money to a borrower. This includes personal loans, mortgage loans, student loans, and business loans. Promissory notes can also be used in less formal lending situations, like when an individual borrows money from a family member through a family loan.

Who Writes a Personal Loan Promissory Note?

When you get a personal loan, the lender is usually the one who writes a personal loan promissory note, and you sign it. If you don’t sign it, the promissory note is not valid. This is how personal loans work.Some lenders require borrowers to sign a promissory note for a personal loan in front of a notary. Once the note is signed, the lender gets the original and the borrower gets a copy for their records. 

What Is Included in a Personal Loan Promissory Note?

For a promissory note to be valid, it must contain certain information. This includes:

Borrower and Lender Information

A personal loan promissory note will include the name, address, and signature of both the borrower and the lender

Loan Amount

The promissory note will also clearly state the amount of money the loan is for, which is known as the loan principal.

Interest Rate

A promissory note will specify the interest rates on the loan. Borrowers should make sure that they understand the difference between APR vs interest rate for personal loans.


If the personal loan is secured, information about the collateral will be included in the promissory note. It will outline what collateral the borrower is using, and if and when the lender has the right to take possession of the collateral. 

Payment Terms

Details about the loan’s repayment period and any fees associated with the loan, will be listed in the note.

Payment Due Dates

The promissory note will include the date the document was created, the date it was signed, and the final repayment date. The promissory note may also include the date the first payment is due.

Payment Method

The promissory note may also contain details about how to repay the loan — for instance, whether it’s by check or through online payments. 

Late Payment Penalties 

If the loan includes penalties for late payments, the promissory note should state what those fees are.

Personal Loan Promissory Note Examples 

Promissory notes can be used for a number of different types of loans, including student loans, mortgage loans, and personal loans. 

Student Loan Promissory Notes

Most lenders require a promissory note for student loans. If you are taking out several private student loans to finance your education, you will likely need to sign a different promissory note for each one. In the case of federal student loans, however, you may be able to sign just one master promissory note. It will specify your obligation to repay the U.S. Department of Education. 

Mortgage Promissory Notes

Most mortgages include promissory notes as part of the closing process. This is just one of the many documents you may have to sign at closing. It contains the terms of loan and how and when you will repay the lender.

Personal Loan Promissory Notes

When you take out a personal loan, you may need to sign a promissory note. A promissory note for a personal loan may be used for both short-term personal loans and long-term personal loans

Personal Loan Promissory Note vs Personal Loan Agreement

Although these two documents might seem similar, there are some key differences. A personal loan agreement is a formal, more comprehensive document that lays out all the details of the loan and the responsibilities of both parties. For instance, it generally includes what methods the lender may use if the borrower fails to repay the loan, such as seizing the borrower’s collateral if the loan is secured. A personal loan promissory note, on the other hand, focuses more on the borrower. It outlines what the borrower needs to do to repay the loan. While it may outline the consequences of not making payments, it typically doesn’t specify how the lender may implement them.  

The Takeaway

If you’re planning to take out a personal loan, you may need to sign a promissory note. This document will list the loan amount, the interest rate, and the terms of repayment. By signing a personal loan promissory note, you’re making a promise to repay the loan. Be sure to read it carefully and make sure you understand what you’re agreeing to before signing.As you explore personal loan options, Lantern can help simplify the process. In our online marketplace, you can get offers from multiple lenders all at once, making it faster and easier to choose the best rates and terms for your needs.

Frequently Asked Questions

Is a personal loan a promissory note?
What is a personal loan promissory note?
When is a personal loan promissory note needed?
Photo credit: iStock/LaylaBird

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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