If you are considering either borrowing or lending money with a promissory note, be sure you know the pros and cons of using an unsecured promissory note.
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updated September 1, 2023 · 3min read
Whether you are the borrower on an unsecured promissory note, or the holder of the note, there are potential advantages and disadvantages.
Promissory notes can be classified in two ways: by the length of the loan, and by the manner in which the loan is repaid. Loans may be considered long-term or short-term. Although there is no legal definition, a short-term loan is generally for a year or less.
Promissory notes are typically repaid in one of three ways:
If you borrow money and sign an unsecured promissory note to legally obligate yourself or your business for the debt, there are both advantages and disadvantages.
The advantages include:
Some possible disadvantages are:
You may be a promissory noteholder if you are the original lender, or if you bought the note. Being the holder of an unsecured promissory note also has its pros and cons.
Advantages of holding an unsecured note include:
Disadvantages include:
Promissory note forms are fairly simple. Click here to prepare an unsecured promissory note.
by Edward A. Haman, Esq.
Edward A. Haman is a freelance writer, who is the author of numerous self-help legal books. He has practiced law in H...
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