Promissory Note

A written promise to repay, in about a minute

Someone you know needs money. You have it. The conversation is friendly, the amount is agreed, and writing it down feels like it would insult them. 

Then a year passes. Their memory of the arrangement differs from yours — not dishonestly, just differently. Was it a loan or a gift? Was there interest? Was it due by December or “when things pick up”?

A promissory note prevents all of that in about a minute, and it protects the borrower as much as the lender by fixing what is actually owed.

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About a minute · Jurisdiction-specific · PDF download · ✍️ Sign free with IndigoESign

What a promissory note is

A one-sided written promise by a borrower to pay a specified sum to a lender, either on a fixed date, in instalments, or on demand.

It is signed by the borrower alone, which is what distinguishes it structurally from a loan agreement — there are no mutual obligations to negotiate, just an acknowledgement of the debt and the terms of repayment.

That simplicity is the point. It is short, quick and proportionate for straightforward lending.

Promissory note or loan agreement?

The most common question, and the answer is usually clear once you look at the terms.

Use a promissory note if the arrangement is “I will repay ₹2,00,000 by 31 December, with 6% interest.”

Use a loan agreement if there is collateral, a detailed repayment schedule, conditions on how the money is used, or a business borrower.

The three types

Demand note. Payable whenever the lender asks. Flexible, but the limitation period for enforcement may start running from the date of demand — or from the date of the note, depending on your jurisdiction. Worth checking locally.

Fixed date note. Payable in full on a stated date. The simplest and clearest form.

Instalment note. Repaid in scheduled instalments, usually with an acceleration clause making the whole balance due if a payment is missed.

What the note must contain

• Date and place of execution
• Lender and borrower — full legal names and addresses
• Principal amount — in figures and in words
• Interest — the rate, how it is calculated, and whether it is simple or compound. If there is no interest, say so explicitly rather than leaving it blank
• Repayment terms — on demand, on a fixed date, or by instalments with a schedule
• Late payment — default interest or charges, within whatever limits apply where you are
• Acceleration clause — the full balance becoming due on a missed payment
• Prepayment — whether the borrower may repay early, and whether any penalty applies
• Security, if any — though a secured note usually indicates you should be using a loan agreement instead
• Governing law
• Borrower’s signature, with witness lines where local practice expects them

Things worth knowing before you lend

Interest rate caps exist in most jurisdictions. Charging above the limit can make the interest — occasionally the whole debt — unenforceable. Check the cap that applies before setting a rate.

Lending as a business is regulated. Occasional personal lending is one thing. Lending regularly, at interest, to multiple borrowers may require a licence.

Stamp duty or registration may apply. Some jurisdictions, India among them, require promissory notes to be stamped to be admissible as evidence. An unstamped note can create real difficulty at exactly the wrong moment.

Interest-free loans can have tax implications. Below-market or interest-free lending is treated differently in some tax systems, particularly between related parties or for larger amounts.

Keep the signed original. A copy is weaker evidence, and in some jurisdictions the original note must be produced to enforce it.

If repayment does not happen

Start with a written reminder, then escalate to a Demand Letter for Payment stating the amount, the basis of the debt, a deadline and the consequence.

In many jurisdictions a documented demand is expected before a claim can proceed, and a clear letter resolves a meaningful share of disputes without going further.

An example prompt

Promissory note. Borrower: Rahul Mehta, Jaipur. Lender: Priya Nair, Jaipur. Principal ₹3,00,000 advanced on 1 September 2026. Simple interest 8% per annum. Repayable in 12 monthly instalments of ₹26,000 starting 1 October 2026. Whole balance becomes due if any instalment is more than 15 days late. Early repayment permitted without penalty. Governed by Indian law, Rajasthan.

That produces a complete note covering each term plus the standard provisions, editable before download.

Related documents

• Loan Agreement — for structured or secured lending
• Demand Letter for Payment — when repayment is overdue
• Payment Invoice — for money owed for goods or services rather than lent
• Affidavit of Ownership — where an asset backs the debt
• Financial documents — the full set

FAQs

What is a promissory note? 

A written promise by a borrower to pay a specified sum to a lender, either on a fixed date, in instalments, or on demand. It is signed by the borrower alone.

Is a promissory note legally binding?

 It generally is, once properly executed, provided it meets local requirements. Some jurisdictions require stamping or specific formalities for the note to be admissible, so check what applies before relying on it.

What is the difference between a promissory note and a loan agreement? 

A promissory note is signed by the borrower only and covers simple repayment terms. A loan agreement is a two-sided contract covering interest, schedules, security, conditions and default in detail. Use a note for simple personal lending.

Does a promissory note need to be notarised or witnessed?

 Requirements vary. Notarisation is not universally required but strengthens evidence, and some jurisdictions expect stamping or witnessing. Confirm the position locally.

Can I charge interest on a promissory note? 

Yes, subject to interest rate caps that exist in most jurisdictions. Charging above the limit can render the interest, and occasionally the whole debt, unenforceable.

What happens if the borrower does not repay?

 Begin with a written reminder, then a formal demand letter. If that fails, the note is the evidence of the debt in any subsequent claim, which is precisely why having it in writing matters.

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IndigoEDocs produces AI-assisted drafts. Lending is regulated and interest caps, stamping and registration requirements vary by jurisdiction — confirm the position locally before lending a significant sum.