A promissory note for a car is written evidence of the loan transaction between a borrower and a lender. People often take loans for purchasing cars and a promissory note is then prepared by adding the details of the lender, borrower, amount of loan, interest rate and repayments. This note serves as a promise on behalf of the borrower that he will repay the lender the loan taken for the car.
This is duly signed by the borrower, lender and witness and is a legally binding agreement that can be used to claim the money or reach out to the court.
A promissory note for a car can be of two types:
- Secured: In this type, the loan transaction is secured with any of the borrower’s assets. In case of default, the borrower will have to sell the collateral to make the lender’s payment.
- Unsecured: The loan repayment is not secured against anything in this type of promissory note and in case of default, the lender would have to approach the court for the legal proceedings.
When a car loan is being taken, a promissory note can be drafted from scratch or a template from the online sources or the programs, such as Microsoft Word, can be availed and customized as per the details and requirements.
Based on the nature and amount of the loan transaction as well as the demands of the lender, varied information and details can be included in different promissory notes.
As it is a legal document, some lenders and borrowers need it to be comprehensive to avoid any ambiguities and legal issues. Sometimes, even a detailed separate repayment schedule is included with the promissory note as well.
However, the general details included in a promissory note for a car are:
- Date of the promissory note.
- Date of loan.
- Loan amount.
- Details and signature of the borrower.
- Details and signature of the lender.
- Signature of the witness.
- Repayment schedule.
- Interest rate.
- A grace period of late payments, if any.
- Secured or unsecured.
- Conditions in case of default.
I, [Name Here], hereby, promise to pay the car loan taken on [DATE] (loan borrowing date) from [Lender’s name], having a value of $[AMOUNT]. An interest rate of [X]% would be charged on an annual basis on the principal borrowed money.
The payment will be made in three installments:
|Date||Principal amount ($)||Interest amount ($)||Total amount ($)|
The grace period for the late payments is within a month of the due installment payment date.
It is a secured loan and in case of default, the payments would be made by selling the purchased car for which the loan was taken. The legal charges would be paid by the borrower.
This loan shall be governed under the laws of the state of [TEXT].
Borrower signature: __________
Lender signature: ____________
Witness signature: ____________
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