How to Write a Binding Promissory Note

By: Karen Rogers

Make sure the promissory note's terms and conditions are clear.

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It doesn’t take an attorney to write a binding promissory note. As long as all the legal elements are contained within the promissory note, it will bind both parties to the terms. The promissory note must list the parties, the amount of the loan and the repayment terms. Once signed, the promissory note becomes a binding contract, so all parties must agree to and understand the terms before signing.

Step 1

Start the opening paragraph by entering the personal information for each party. Use each party’s legal name, address, telephone number and the date the agreement will be signed. As an example, you could say: On this _______ day of (month), (year), I, (borrower’s legal name), residing at (borrower’s address), telephone number (fill in number), agree to pay (amount of loan) to (lender’s legal name), residing at (lender’s address), telephone number (fill in number).

Step 2

Describe the terms of the note in the second paragraph. Write the loan amount numerically and in words the same way you would if you were writing out a check. Identify the interest amount and the loan repayment terms. If the loan will be paid back in a lump sum, identify the date the payment is due and the full amount. If the loan will be repaid in installments, clearly state the date each payment is due and the amount due with each payment. Include any late fees or penalties that will apply if the borrower is late making the payment.

Step 3

Looking at an example, if the loan will be repaid in a lump sum, the paragraph could read: I (the borrower) agree to pay the sum of (loan amount) and interest in the amount of (interest amount) for a total of (total loan amount and interest amount) on or before (enter the date full payment is due). If I (borrower) do not repay the loan by (enter the date), an additional penalty of (amount) will be due along with the loan. When finished, type signature lines for the borrower, lender, and any witnesses after all loan terms have been disclosed.

Step 4

Select a day and time the borrower, lender and any witnesses are available to sign the promissory note in each others presence. Have the borrower fill in their name, address and telephone number in the first paragraph. When writing the second paragraph, leave space so the borrower can sign their initials after the loan amount, interest amount, total amount due, the date the payment is due and the additional penalty amount. This way, the borrower cannot claim he or she was unaware of the terms should a dispute arise later. You may want to have a notary attend to verify the identity of the parties and notarize the document.


  • If the loan is being repaid in installments, you may want to provide a payment amortization schedule so the payment date and amount due is clear.


  • Be sure the interest rate does not exceed the state’s legal limit, which would make the rate unenforceable by law.


About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.

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