Promissory Note Generator (US)

About the Promissory Note Generator (US)

A promissory note is the borrower’s written, signed promise to repay a loan: how much, at what interest rate, when and how. Enter the borrower, the lender, the amount and the rate, choose how the loan is repaid — monthly installments, installments with a balloon payment, interest only, one payment at maturity, or on demand — and the note writes itself with its repayment schedule, worked out in exact decimal arithmetic so every row adds up to the cent.

The note covers the late charge, prepayment, an unsecured loan or one secured by a separate security agreement, default and acceleration, collection costs, the waivers a note usually carries, a co-signer (with the Federal Trade Commission’s Notice to Cosigner on its own page) and the governing state. The checks remind you to compare the rate with your state’s usury limit, and for a family loan with the IRS applicable federal rate. The free preview shows every page with your details and the first part of the wording; a Premium pass unlocks the full note and schedule to download, copy or print.

Common uses

• Lending money to a family member or friend for a car, tuition or a house deposit, with a clear schedule.
• A small business borrowing from an owner or an investor on a short-term note.
• Selling a car or equipment on installments, with a note for the unpaid price.
• Writing down an existing informal loan so both sides know the balance and the payments.

What makes the note negotiable

Under the Uniform Commercial Code, a note is negotiable when it is an unconditional promise to pay a fixed amount of money, with or without interest or other charges, payable to bearer or to order, on demand or at a definite time, and states no other undertaking beyond giving or protecting collateral, confessing judgment or waiving laws that protect the borrower (UCC 3-104). The note is written “to the order of” the lender by default, so the lender can transfer it; choose “to the lender only” for a plain contract that cannot be negotiated. Sign it on paper: the federal E-SIGN Act does not cover records governed by the UCC other than Articles 2 and 2A (15 U.S.C. § 7003).

How the schedule is worked out

• Monthly installments: the level payment is P·r ÷ (1 − (1 + r)^−n), with r the annual rate ÷ 12, rounded to the cent. Each month’s interest is the unpaid balance × r, the rest of the payment reduces the principal, and the final payment absorbs the rounding.
• Balloon: the same payment worked out over the longer amortization period, with the whole remaining balance due with the last payment of the term.
• Interest only: the balance × r each month, and the principal with the last payment.
• One payment at maturity, or on demand: simple interest for the actual number of days on a 365-day year.

The note states the method in words, so the schedule and the promise always agree. The figures assume every payment is made on its due date.

Interest limits and fees

Every state caps the interest a lender may charge — usury laws — and many limit late charges and prepayment penalties; the caps differ by state and by kind of loan and lender. The note adds “to the extent permitted by law” to fees, but a rate above your state’s cap can make the interest, or the loan, unenforceable: check the statute or ask the state’s financial regulator before you sign. The checks never state a cap for you, because they change and depend on the loan.

Loans between family members

If the rate is below the IRS applicable federal rate, the IRS may treat the interest not charged as a gift from the lender and as interest the lender received (26 U.S.C. § 7872). For gift loans between individuals the rule does not apply on any day the loans between them total $10,000 or less, unless the money buys or carries income-producing assets; and for loans up to $100,000 the income-tax amount is limited to the borrower’s net investment income, treated as zero when that is $1,000 or less (unless avoiding tax is one of the loan’s main purposes). The IRS publishes the short-term (up to 3 years), mid-term (over 3 and up to 9 years) and long-term rates every month (applicable federal rates; 26 U.S.C. § 1274(d)); the tool tells you which one to compare and lets you enter it.

Co-signers and security

A co-signer signs as a co-maker and is jointly and severally liable. The Federal Trade Commission requires lenders and retail installment sellers to give a co-signer, before they sign, a separate Notice to Cosigner in exactly the words of 16 CFR 444.3; the tool prints it as its own first page for any co-signer. A secured note refers to a separate security agreement, which this tool does not write; to protect the lender against other creditors, the security interest is usually perfected by a UCC-1 financing statement or, for a vehicle, by recording the lender on the title.

Limitations

• A generic template, not legal or tax advice. Complex arrangements — convertible notes, notes secured by real estate, business lending as a trade — need a professional.
• The schedule assumes payments on their due dates and a first payment about one month after the note.
• No security agreement, mortgage or deed of trust is generated, and no state usury cap is checked for you.
• The PDF is A4-sized; print with “fit to page” on US Letter paper, or download the DOCX and change the page size.

Privacy

Everything happens in your browser. Names, addresses and loan terms are not uploaded or stored by MySmartCoPilot. If you tick Keep a draft in this browser, the form is saved in this browser’s local storage until you untick it.