NoteHouse

A promissory note, clause by clause.

The standard form for a private loan: what each clause does, a completed example, and a fill-in version you can use as it stands.

The example on the right is the note NoteHouse drafts for a $25,000 loan at 6.00% over three years. Every clause in it is there for a reason. The sections below say what each one does and what to put in it, in the order they appear.

A note does not need legal language to work. It needs the parties, the amount, the interest, the schedule, and what happens if payments stop. For the background, read what a promissory note is and what it must say.

Promissory note

$25,000.00Portland, Oregon
15 October 2026

For value received, the undersigned, Daniel R. Ellison (“Borrower”), of Seattle, Washington, promises to pay to the order of Margaret A. Ellison (“Lender”), of Portland, Oregon, at such place as Lender may designate in writing, the principal sum of Twenty-five thousand dollars and no cents ($25,000.00), together with interest on the unpaid principal balance from the date the funds are advanced at the rate of 6.00% per year.

  1. 1.Payment. Principal and interest are payable in 36 consecutive monthly installments of $760.55 each, beginning 15 November 2026 and continuing on the same day of each month thereafter. The final installment is due 15 October 2029, when all unpaid principal and accrued interest is due and payable in full.
  2. 2.Application of payments. Each payment is applied first to any fees then owing, next to accrued interest, and the remainder to principal.
  3. 3.Prepayment. Borrower may prepay this note in whole or in part at any time without penalty. A partial prepayment is applied to principal and does not excuse any later scheduled installment.
  4. 4.Late charge. If any installment is not received within 10 days after its due date, Borrower will pay a late charge of $25.00 for that installment.
  5. 5.Default. If Borrower fails to pay any installment within 30 days after its due date, Lender may, by written notice, declare the entire unpaid balance of principal and accrued interest immediately due and payable.
  6. 6.Governing law. This note is governed by the laws of the State of Oregon. Borrower waives presentment, demand, protest and notice of dishonor.
Daniel R. Ellison
Borrower
Date
Margaret A. Ellison
Lender
Date

The clauses

What each one does, and what to write in it.

  1. 1Parties

    Full legal names and addresses of borrower and lender. A business borrows under its exact registered name. Nicknames and initials cause trouble later.

  2. 2Promise to pay

    The sentence that makes it a note. The borrower promises unconditionally to pay a stated sum to the lender. The amount appears in words and in figures so a typo cannot change it.

  3. 3Interest

    The annual rate and the method. Simple interest on the outstanding principal is the norm for private loans. Charge at least the applicable federal rate for a loan between relatives; see what rate to charge on a family loan.

  4. 4Payments

    How many installments, how much, when the first is due, and the maturity date. Say how a payment is applied: fees, then interest, then principal. Attach the schedule from the loan calculator.

  5. 5Prepayment

    Whether the borrower may pay early and whether a charge applies. Most private notes allow prepayment without penalty. Make clear that a prepayment does not skip the next installment unless you want it to.

  6. 6Late payment

    The grace period in days and the late fee, flat or a percentage of the overdue installment. Ten to fifteen days and a modest fee is usual. A fee out of proportion to the harm may not be enforced.

  7. 7Default and acceleration

    What counts as default, and the lender’s right to call the whole balance due after it. Without acceleration the lender can only sue for each missed installment as it comes due.

  8. 8Security

    Whether the loan is secured and by what. The note alone creates no lien. A security agreement and UCC-1 filing cover personal property; a mortgage or deed of trust covers real estate and is recorded with the county.

  9. 9Costs, waivers, governing law, notices

    Standard clauses that make enforcement cleaner: the borrower pays collection costs, waives the formal demand steps, the note is governed by a named state’s law, and notices may go by email. Any change to the note must be in writing signed by both.

  10. 10Signatures

    The borrower must sign; the lender customarily does too. Date each signature. Electronic signatures are valid; see electronic signatures on promissory notes.

Form of note

Replace the bracketed terms. Delete the alternatives you do not use.

PROMISSORY NOTE

Principal amount: $[AMOUNT]                                  Date: [DATE]
Place: [CITY, STATE]

1. Promise to pay. For value received, [BORROWER FULL LEGAL NAME] of
   [BORROWER ADDRESS] (the "Borrower") promises to pay to the order of
   [LENDER FULL LEGAL NAME] of [LENDER ADDRESS] (the "Lender") the principal
   sum of [AMOUNT IN WORDS] dollars ($[AMOUNT]), together with interest as
   set out below.

2. Interest. Interest accrues on the unpaid principal at [RATE]% per year,
   simple interest, from [FUNDING DATE] until paid in full.

3. Payments. The Borrower will pay [NUMBER] [monthly / quarterly / annual]
   installments of $[PAYMENT] each, beginning on [FIRST PAYMENT DATE] and
   continuing on the same day of each period, with a final payment of all
   remaining principal and interest due on [MATURITY DATE]. Payments are
   applied first to fees, then to accrued interest, then to principal.
   [ALTERNATIVE: Interest only is payable each period; the entire principal
   is due on the maturity date.]

4. Prepayment. The Borrower may prepay all or part of the principal at any
   time without penalty. A prepayment does not excuse the next scheduled
   payment.

5. Late payment. A payment not received within [GRACE DAYS] days after its
   due date is late. The Borrower will pay a late fee of [$FLAT AMOUNT /
   PERCENT% of the overdue installment] for each late payment.

6. Default and acceleration. The Borrower is in default if any payment is
   more than [DEFAULT DAYS] days late, or if the Borrower becomes insolvent
   or files for bankruptcy. On default the Lender may, by written notice,
   declare the entire unpaid balance immediately due.

7. Security. This note is [unsecured / secured by the property described in
   a separate security agreement, mortgage or deed of trust of the same
   date].

8. Costs. If the Lender has to enforce this note, the Borrower will pay the
   Lender's reasonable costs of collection, including attorney's fees, to
   the extent permitted by law.

9. Waivers. The Borrower waives presentment, demand, protest and notice of
   dishonor.

10. Governing law. This note is governed by the laws of the State of
    [STATE]. Any amendment must be in writing and signed by both parties.

11. Notices. Notices may be given by email to the addresses below and are
    effective when sent.


Borrower: ______________________________   Date: ____________
          [BORROWER FULL LEGAL NAME], [EMAIL]

Lender:   ______________________________   Date: ____________
          [LENDER FULL LEGAL NAME], [EMAIL]

Attachment: Amortization schedule.

This form is general information for an unsecured loan between individuals in the United States. It is not legal advice and is not adapted to any state. For a secured loan, a loan to a business, or anything large, have a lawyer review it.

Questions

Is this template free to use?
Yes. Copy the form of note below and fill in the terms. For a straightforward unsecured loan between individuals it covers what a court expects to see.
Does the note need to be notarized?
No. A promissory note is valid when the borrower signs it. A mortgage or deed of trust that secures the note must usually be notarized because it is recorded.
Can we sign it electronically?
Yes. The federal ESIGN Act and state law give an electronic signature the same effect as ink, provided the signer intended to sign and a record of the signing is kept.
What if the loan is secured by property?
The note stays the same, with a clause saying it is secured. The security itself needs a separate document: a security agreement and UCC-1 filing for personal property, or a mortgage or deed of trust for real estate.
When should I use a lawyer instead?
When the loan is large relative to what either party has, is secured by real estate or a business, is made to a company, or is part of a larger deal such as a property sale. The note is cheap to get right and expensive to get wrong.

Or let NoteHouse draft it from your terms.

Enter the amount, rate and schedule. NoteHouse writes the note, attaches the schedule, collects both signatures, and keeps the ledger. Free for up to two open loans.

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