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PROMISSORY NOTE
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Borrower:



____________________ of ______________________________________ (the "Borrower")

Lender:

____________________ of ______________________________________ (the "Lender")

Principal Amount:      £_____________ GBP

  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 £_____________ GBP, without interest payable on the unpaid principal, beginning on 17 September 2026.
  2. This Note will be repaid in consecutive monthly instalments commencing on 17 September 2026 and continuing on the seventeenth of each following month until 17 September 2026 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 15 September 2026

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What is a Promissory Note?

A Promissory Note is a written promise from a borrower to repay money to a lender. It records the loan amount, repayment terms, interest, and what happens if the borrower doesn't repay. 

Promissory Notes are often used for personal or business loans and are helpful for non-traditional lenders (e.g., individuals and corporations). They can be secured with collateral, or unsecured.

When should I use a Promissory Note?

A Promissory Note may be used when a person or business lends money and wants clear, written repayment terms.

It's commonly used for:

  • Personal or family loans, such as lending money to a friend or family member to cover bills, rent, tuition, or other debts.
  • Vehicle purchase loans, such as pairing a Promissory Note to a Vehicle Bill of Sale to help someone buy a car, motorcycle, boat, or RV
  • Home-related loans, such as helping someone pay for repairs, renovations, a down payment, or moving costs.
  • Business loans, such as using a Loan Agreement to document money lent for startup costs, equipment, supplies, or short-term cash flow.
  • Loans for major purchases, such as furniture, appliances, electronics, or other expensive items.
  • Private loans with repayment terms, such as documenting when and how the borrower will repay the lender.
  • Interest-bearing loans, such as a loan where the borrower agrees to repay the principal amount plus interest.
  • Loans with a payment schedule, such as repayment in weekly, monthly, or lump-sum installments.
  • Secured loans, such as a loan backed by collateral like a vehicle, equipment, or other valuable property.

A written Promissory Note can help reduce confusion by recording the loan amount, repayment date, interest terms, and what may happen if the borrower does not pay.

Promissory Note vs Loan Agreement vs IOU: What’s the difference?

A Promissory Note, a Loan Agreement, and an IOU can all record money owed but provide different levels of detail.

A Promissory Note is usually more detailed than an IOU, but simpler than a Loan Agreement.

Promissory Note

Loan Agreement

 IOU

Simple, concise documentation of a loan

Comprehensive, detailed documentation of a loan

Confirms the existence of a debt

Better for smaller loans with basic lending terms

Better for larger loans with complex lending terms

Better for smaller, more informal loans with simple lending terms

Often negotiable (i.e., can be transferred as long as it's not prohibited)

Not a negotiable instrument; assignment/transfer governed by contract terms 

May be hard to enforce unless it clearly sets out all key terms; non-negotiable

If you have a more complex loan, LawDepot’s Loan Agreement template can help document the lending terms and payments.

What should a Promissory Note include?

A Promissory Note should include the main loan terms, such as:

  • Lender and borrower details

  • The loan amount

  • The repayment date

  • Interest charged (if applicable)

It may also include:

  • The loan date

  • A repayment schedule

  • Late payment or default terms

  • Early repayment terms

  • Collateral details (if applicable)

  • The governing law

  • Signing details

Secured vs unsecured Promissory Notes

A Promissory Note may be secured or unsecured. The difference is whether the borrower uses collateral to back the loan.

Secured Promissory Note

A secured Promissory Note is backed by collateral, such as:

  • Vehicles

  • Equipment

  • Shares

  • Personal property

  • Business assets

  • Other valuable property

If the borrower does not repay, the lender may have the right to the collateral, depending on the note and applicable law. Some collateral may need extra documents or registration.

Unsecured Promissory Note

An unsecured Promissory Note is not backed by collateral. The borrower still promises to repay the loan, but the lender lacks a specific asset to claim if the borrower defaults.

Unsecured notes are often used for smaller loans or loans between people who trust each other.

Need extra security for repayment? Depending on the loan, a Personal and Corporate Guarantee can be used to record a guarantor’s promise to repay if the borrower does not.

If ownership of an asset is being transferred separately, a Bill of Sale may also be useful to document the new ownership.

How do I create a Promissory Note with LawDepot?

To create a Promissory Note with LawDepot, answer our guided questionnaire and have your document in minutes.

LawDepot’s template is available to customise your document to comply with laws in England, Wales, Scotland, or Northern Ireland.

Indicate if you’re lending or borrowing money, then complete the following steps:

1. Add the loan purpose and location

Select the purpose of the loan, such as for use in:

  • Business

  • Bills or debts

  • Real estate

  • A vehicle purchase

  • Another purpose

Then choose the UK jurisdiction in which the document will be used.

2. Enter the loan details

Add the loan amount, any applicable interest, and the date the lender will provide the money.

3. Choose payment and repayment terms

State how the borrower will repay the loan, such as through regular payments, a single payment, or another payment plan that fits your situation.

For regular payments, include the payment frequency, first payment date, payment schedule, and either the final payment date or total number of payments.

You can also state whether the borrower may repay the loan early or make lump-sum payments, and whether late payment penalties will apply.

4. Enter lender and borrower details

Add each party’s full name and address. The lender and borrower can each be:

  • An individual

  • A company or organisation.

You can also add more than one lender or borrower, if needed.

5. Add co-signer and collateral details

State whether anyone will co-sign the loan. A co-signer is the individual who agrees to be legally responsible for repaying a loan if the borrower doesn’t pay.

If the borrower will use collateral, add the asset or personal property details.

6. Add additional information and signing details

Add any extra terms needed for the loan. Then, choose whether the lender and borrower will sign the Promissory Note in front of a witness.

Once complete, the parties can review, sign, and keep a copy for their records.

Promissory Note FAQs

Is a Promissory Note legally binding in the UK?

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Yes, a Promissory Note can be legally binding in the UK if it meets the basic requirements of a contract.

This usually means the parties agree to clear terms, exchange something of value, and intend the agreement to be legally binding.

A Promissory Note usually states:

  • The amount owed

  • Who must repay it

  • Who should receive payment

  • When repayment is due

Can I charge interest on a Promissory Note?

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Yes, a lender can usually charge interest on a Promissory Note, as long as the terms are clear and comply with the law.

The note may state:

  • Whether interest applies

  • The interest rate

  • How interest is calculated

  • When interest starts accruing

  • Whether the rate changes after default

This template is intended for private loans, such as loans between family members, friends, or related companies. 

If you lend as part of a business or to customers generally, consumer credit or other consumer credit rules may apply, and you may want to talk to a lawyer about your situation.

For questions about interest, tax treatment, or other financial implications, consider speaking with an accountant or other financial professional.

Does a Promissory Note need to be witnessed or notarised?

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A Promissory Note generally does not need to be notarised in the UK to be valid. However, a witness may help show that the parties signed the document if there is a dispute.

Witnessing requirements may differ if the Promissory Note is signed as a deed or if the transaction involves additional security documents.

Do I need a solicitor for a Promissory Note?

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You do not always need a solicitor to create a Promissory Note, especially for a straightforward loan.

Talking to a lawyer may be helpful if:

  • The loan amount is large

  • The borrower is a company

  • The note is secured against personal property or business assets

  • The interest or default terms are complex

  • The lender is regularly providing credit

  • The parties are in different countries or legal regions

  • There is a risk of dispute

Legal advice may also help confirm whether the document meets the loan requirements.

What happens if the borrower does not repay?

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If the borrower does not repay, the lender may be able to take steps to recover the money. This could include sending a formal demand for payment (i.e, a Demand Letter), agreeing to a repayment plan, or making a court claim. 

If the Promissory Note is secured, the lender may also have rights to the collateral, depending on the note and any security documents.

Can a Promissory Note be repaid early?

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Yes, a Promissory Note can allow early repayment. The document can state whether the borrower may repay early and whether any fee or adjusted interest applies.

If early repayment is allowed without a penalty, the borrower can repay all or part of the loan before the due date.

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