Definition

Noun: A written and signed promise by one party (the maker or issuer) to pay a specific sum of money to another party (the payee) either on demand or at a fixed or determinable future time. It is a formal, unconditional, and negotiable debt instrument.

Usage

A promissory note is a formal financial document that creates a legally binding obligation to repay a debt. It is commonly used in personal loans, business transactions, and real estate deals to formally record the terms of the loan.

Examples

• The small business secured a loan by issuing a promissory note to the investor.
• As part of the car sale, the buyer signed a promissory note agreeing to monthly payments.
• The bank holds the promissory note as evidence of my mortgage debt.

Advanced Usage

• Negotiable Instrument: A promissory note is a type of negotiable instrument under commercial law, meaning the right to payment can be transferred to another party (endorsed) if the note is properly drafted.
• Demand Note vs. Term Note: A note payable "on demand" is due whenever the payee requests payment. A note with a specific due date is a term note.

Variants and Related Words

• Note: A common shortened, informal term for a promissory note in financial contexts (e.g., "He co-signed the note.").
• IOU (I Owe You): An informal acknowledgment of a debt, but it is not as detailed or legally formal as a promissory note and may not be negotiable.
• Loan Agreement: A more comprehensive contract that often includes a promissory note as one of its core components, along with other terms and conditions.

Synonyms

• Note of hand
• Demand note
• Commercial paper (in a broader financial context)

Related Phrases

• To issue a note: To create and sign a promissory note as the borrower.
• To hold the note: To be the party (lender/investor) in possession of the promissory note and entitled to receive payment.
• To discount a note: To sell a promissory note to a bank or other entity for its present value before its maturity date.

Noun

1. a promise to pay a specified amount on demand or at a certain time
   • I had to co-sign his note at the bank