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Promissory Note



Your Promissory Note

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(this "Note")


____________________ of ______________________________________ (the "Borrower")


____________________ of ______________________________________ (the "Lender")

Principal Amount:      $_____________ CAD

  1. FOR VALUE RECEIVED, The Borrower promises to pay to the Lender at such address as may be provided in writing to the Borrower, the principal sum of $_____________ CAD, without interest payable on the unpaid principal, beginning on June 18, 2024.
  2. This Note will be repaid in consecutive monthly installments commencing on June 18, 2024 and continuing on the eighteenth of each following month until June 18, 2024 with the balance then owing under this Note being paid at that time.
  3. At any time while not in default under this Note, the Borrower may pay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
  4. Notwithstanding anything to the contrary in this Note, if the Borrower defaults in the performance of any obligation under this Note, then the Lender may declare the principal amount owing under this Note at that time to be immediately due and payable.
  5. The Borrower shall be liable for all costs, expenses and expenditures incurred including, without limitation, the complete legal costs of the Lender incurred by enforcing this Note as a result of any default by the Borrower and such costs will be added to the principal then outstanding and shall be due and payable by the Borrower to the Lender immediately upon demand of the Lender.
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Last Updated February 1, 2024

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What is a Promissory Note?

A Promissory Note is a legally binding written promise to repay borrowed money. This document is typically used by non-traditional lenders, like individuals and corporations, when entering into loans with borrowers. 

In Canada, the Bills of Exchange Act governs Promissory Notes and sets out the essential elements and requirements for a valid agreement.

Promissory Notes are also known as: 

  • IOU
  • Notes payable
  • Demand note
  • Commercial paper

Looking for a Promissory Note in French?

Use our Reconnaissance de dette.

How does a Promissory Note work?

Promissory Notes document financial transactions between two parties. Unlike an IOU that only records a loan amount, a Promissory Note details the consequences of failing to repay the loan

After finalizing the terms and conditions of a loan, the lender will issue a Promissory Note. To be considered legally valid, it must include: 

  • Loan terms
  • The accepted interest rate
  • The lender’s and borrower’s signatures

The borrower will then review and sign the document, thus making the Promissory Note legally binding and enforceable. Depending on the agreement, the lender may wish to have the document signed before a witness or notary public.

Crucially, Promissory Notes are negotiable instruments. This term means the loan can be transferred from one individual to another. 

Types of Promissory Notes

LawDepot’s Promissory Note template allows you to create two types of Promissory Notes: 

  1. Simple Promissory Notes outline the basic terms of a loan, such as the principal amount borrowed, interest rate, repayment schedule, and due date.
  2. Demand Promissory Notes include basic terms but do not specify a fixed repayment day. With this type of Note, the funds are due when the lender demands payment. The borrower must pay within a specific timeframe, usually outlined in the Promissory Note.

Benefits of a Promissory Note

1. Clarity

When lending money, relying on a verbal agreement is not enough. A simple Promissory Note clarifies a loan's terms and conditions, saving both parties from future disputes and misunderstandings. Having the original loan amount, interest rate, and repayment schedule in writing ensures that the finer details of the financial agreement are crystal clear for both the borrower and the lender. 

2. Enforceability

In case of a dispute or non-payment, a Promissory Note can be used as evidence in any legal proceeding to enforce the borrower's obligation to repay the debt. It makes it easier for the lender to seek remedies such as obtaining a judgment or pursuing collateral.

When should I use a Promissory Note?

You can customize LawDepot’s Promissory Note template to suit a variety of financial agreements, including: 

  • Business loans, such as capital for a startup business
  • Vehicle loans for cars, boats, or other motor vehicles
  • Real estate loans, such as a down payment on a home
  • Debts or bills, such as credit card debt
  • Other miscellaneous loans, including student loans, familial loans, or investment loans 

What does a Promissory Note include?

LawDepot’s Promissory Note template is highly customizable and can be altered to fit the specific terms of your agreement. A Promissory Note can include: 

  • Purpose of loan
  • Original loan amount
  • Applicable interest rates
  • Loan date
  • Repayment details, including applicable payment schedules
  • Payment dates, including first and final payment dates
  • Options for early repayment or lump sum payments 
  • Late payment penalties 
  • Lender details, including full name and address
  • Borrower details, including full name and address
  • Details of any co-signers 
  • Collateral details
  • Witness or notary details
  • Any additional information the parties choose to include

Promissory Note versus Loan Agreement

Both Promissory Notes and Loan Agreements are contracts between a borrower and a lender that specify the terms and conditions of a loan. But, it is essential to remember a couple of notable differences between these two documents.

Promissory Note Loan Agreement
Simple, concise documentation of a loan Comprehensive, detailed documentation of a loan
Better for smaller loans with basic lending terms Better for larger loans with complex lending terms
Often negotiable (i.e., can be transferred as long as it’s not prohibited) 
Usually non-negotiable (i.e., cannot be transferred) 

Should I notarize my Promissory Note?

Although it's not required, notarizing a Promissory Note is an excellent way to lend credibility to your agreement. Notarization verifies the signatures and identities of the people involved in the Promissory Note. 

You can also sign the Promissory Note in front of a witness. In this case, the witness must be a neutral party with no interest in the document. 

In the event of a legal dispute, a notarized or witnessed Promissory Note can have significantly more credibility in a court of law.

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