What is a Promissory Note

A promissory note is a fancy way of saying "I.O.U.". In fact, I.O.U's are one of the oldest ways people lent money and property. I.O.U's were commonly done on a handshake, but now, it is always advisable to have a legal contract written out and signed by both parties.

The most common inclusions of a promissory note are the total amount of the loan, interest rate and payment schedule, dates of payments, and any collateral used for the promissory note. Sometimes other avenues of compensation are included in the promissory note