Technically, however, a loan agreement is a different type of financial contract. It's not uncommon for the terms 'promissory note' and 'loan agreement' to be used interchangeably.

If you're trying to raise capital for an expansion project, for instance, your lender will present you with a promissory note that includes the details and amount of the loan. If you're a business owner, you may be asked to sign a promissory note when receiving funding for your business. Individuals commonly sign promissory notes when borrowing money for personal, mortgage, student, or business loans. There are several different types of promissory notes, but each one serves as a written agreement explaining the details of a loan.īy using a promissory note, the borrower promises to abide by the loan terms set by the lender and pay back the loan according to the established interest rates and payment schedule. What is a promissory note?Ī promissory note is a written promise to pay back a definite sum of money (typically, a loan), between you (the borrower) and a lender. Here's everything you need to know about promissory notes and their relationship to your financial loan. A promissory note can be issued to individuals or businesses to outline the details of a financial loan.

You'll likely be asked to sign a promissory note if you borrow money from a bank or other lender.

Formal loan arrangement