Are you about to sign a promissory note and are wondering if the bank will accept it? Or maybe you have been offered a promissory note and want to know if they are legal and will be accepted by the bank?
Or perhaps you are curious and want to know more? Whatever your reason might be, we have the answer for you!
We know how stressful finances, loans, and banks can be, especially when you haven’t got the money and need it. Money worries can be frustrating and leave many of us with sleepless nights and teary eyes. But it doesn’t need to be that way.
For many people, promissory notes are a beacon of hope and a way out of dire situations. So let’s look at them today! Let’s find out if banks legally have to accept promissory notes or not and how you can use them!
For those that are unsure, let’s have a little recap of what a promissory note is before we dive in!
A promissory note is a financial instrument that contains a written promise from one party to pay another the sum of money stated on the note.
In essence, it’s like an I.O.U note where the person or company who owes the money agrees to repay the sum in full.
Usually, a promissory note will either state the date the money will be paid by or that it will be paid on demand. When on-demand is used, the receiver of the note can ask for the money to be paid when they wish.
The note will also contain the interest rates of the amount owed, the date and place it was signed, and signatures.
This method of financing is a way to lend and pay back the money without going through a bank. In effect, these notes can be used by anyone wishing to lend or secure money.
They are used by companies and individuals and are viewed somewhere between the informal I.O.U and a secured bank or personal loan.
So now that we have covered what a promissory note is, let’s move on to look at the legality of these and if a bank has to accept them or not.
Let’s get straight into it! Banks are under no legal requirement to accept promissory notes. Remember that laws can fluctuate from state to state, so it’s always best to check directly with your local bank or a legal professional in your region.
Laws can change, too, so be sure to go directly for the most up-to-date and relevant information in your state.
While banks are under no legal obligation to accept promissory notes, they often do! Welcome news for those looking to use them to secure finance or bank loans now or in the future.
Again, this can vary depending on your bank, so be sure to speak to them directly about promissory notes and if they accept them or not.
As promissory notes are legal and enforceable, banks will often accept them as they know they can get their money back if you fail to repay the loan.
For your promissory note to be legal, you can print off a promissory note template online, fill in your details and sign it. Be sure of details such as the amount of money borrowed or to be paid, and when the amount will be paid by.
Include also any interest that will be charged and the conditions of the repayment. Once the note has been signed and dated, it is a legal document that can be used in court if needed.
Banks will usually accept these legal promissory notes as proof that you will make the payments for any loans agreed. They can be used instead of cash to secure a loan, and they will also consider your current credit score in some cases.
How banks use promissory notes, when they accept them, and why will vary from bank to bank, so be sure to check online or with your bank before signing any promissory notes.
As well as accepting promissory notes, banks will offer them too. Most commonly, a bank will offer you a promissory note when signing for a mortgage loan.
The promissory note here is between the bank and the borrower, stating that you will pay the mortgage back according to the terms laid out.
This note will contain details of the money borrowed, the agreed-upon interest rate, and the time allotted to pay the money back. The bank then keeps the promissory note until you pay your mortgage off in full.
Remember, if you run into difficulty making these payments to speak to your lender directly. The terms, payment amount, or time can often be negotiated if you reach out to your bank. It’s better to do that than to stop paying entirely, as doing so can impact your credit score.
As the bank uses the promissory note to ensure that you pay your mortgage back (and the agreed-upon interest rates), the note is considered cash value until the loan is fully paid off.
Often you are asked to sign a promissory note by the bank when taking out your mortgage (along with other legal paperwork).
If you have any questions about the note and its contents, be sure to raise these with the bank before you sign so that you know exactly what you agree to.
And just like that, we have come to the end of our promissory note journey today! As you can see, banks do not legally have to accept promissory notes, but they often do and use them themselves when agreeing on mortgages and other loans!
To ensure that your bank accepts your promissory note, check that it is legal and binding. It’s also worth checking (or proving) that you have the means to repay the money.
Proof of income or assets that could be seized in the event of a default will make a bank more likely to accept the note.
Remember to speak to a financial advisor or a staff member at your bank if you have any more questions. They can offer you the best and most accurate advice for your situation!