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Promissory note for a personal loan: what it is, plus a free template

A promissory note is a written, signed promise to pay back a set amount of money. For a loan between family or friends, one page is usually enough. Here's what goes in it, clause by clause, and a filled sample you can copy.

Checked 2026-09-28 · All guides

General information, not legal or tax advice. A promissory note signed by the borrower counts in every state we checked, with no notary or witness; the differences between states are about loans longer than a year and a few rules for large loans (see below). For a large loan, or one secured by a car, house or other property, have a lawyer draft or review it.

Make your note

Our free generator makes a full family loan agreement, which includes the promise to pay and the repayment schedule, or a short IOU. Fill in the names, amount, rate and dates, then print it or save it as a PDF for both of you to keep. It runs in your browser; nothing you type is sent to us. If you want a note in the classic promissory note form, copy the filled sample below and change the details.

What do you want to make?

Loan agreement (full) Short IOU (one page) Schedule only

Has the money already been lent?

No, this is a new loan Yes, it was lent earlier (put it in writing now)

Lender's full name (who lends the money)

Borrower's full name (who repays it)

Lender's address (optional)

Borrower's address (optional)

Amount lent ($)

Date the money is (or was) given

Amount already repaid ($, if any)

How will it be repaid?

In regular payments All at once, by a date

Repaid in full by

How often?

Date of the first payment

Set the schedule by

Number of payments Amount of each payment

Number of payments

Amount of each payment ($)

Interest

No interest Charge interest

Interest rate (% a year)

Interest starts on (optional: leave empty to start on the day the money is given; set a later date for an interest-free start)

Lender's state

Borrower's state

Other loans the lender made in the last 12 months (optional)

The borrower is a relative

How payments are made (e.g. bank transfer to the Lender's account, or cash against a signed receipt)

Days of grace before a payment counts as late

If a payment is late

Late fee per late payment ($, optional)

State whose law applies (optional) Add a line for a witness

Everything stays in this browser. Nothing is sent to us or saved. We never hold or move money.

What is a promissory note?

It's a written promise to pay. In the Uniform Commercial Code, a model law that each state enacts in its own version, a "promise" is a written undertaking to pay money, signed by the person who will pay, and a "note" is an instrument that is a promise. The key words are undertaking to pay: the borrower doesn't just say "I owe you", they commit to paying a fixed amount back.

Secured or unsecured?

An unsecured note is just the promise: if it isn't paid, the lender has the note and nothing else. A secured note pledges something, like a car or a house, that the lender could claim. The pledge only works once it's filed or recorded under state law, separately from the note. For a home, that means a mortgage or deed of trust recorded with the county; it's also the condition for the borrower to deduct the interest as mortgage interest (IRS Publication 936, "Secured Debt"). Because those filings have their own forms and rules, have a lawyer handle a secured note. The template here is for unsecured personal loans.

What a promissory note should include, clause by clause

Parties. The full names and addresses of the borrower and the lender.
Principal. The amount borrowed, in numbers and words ("$3,000, three thousand dollars"), and the date the money is handed over.
Interest rate. A yearly rate, or "0%". If you charge at least the IRS minimum rate for the month the loan is made (the applicable federal rate, or AFR), the loan isn't "below-market" under the tax code. For October 2026 the short-term AFR, for loans of 3 years or less, is 4.25% a year. Zero is allowed too; see what rate to charge on a family loan for what 0% means for taxes.
Payment schedule. The amount of each payment, the day of the month it's due, the first due date and the last.
Where and how payments are made. Bank transfer, check or cash, and to which account. Transfers leave a record; if it's cash, the lender writes a receipt.
Paying early. The borrower may pay extra or pay off the rest at any time, with no penalty, and interest stops on what's been repaid.
Late payments. Keep this humane. You can leave out a late fee altogether and write: "If I can't make a payment, I'll say so before the due date, and we'll agree a new date in writing."
Default, in plain words. What happens if payments stop: for example, if three payments in a row are missed and no new date was agreed in writing, the lender may ask for the whole remaining balance.
Signatures and date. The borrower signs, because the note is their promise. Having the lender sign too shows both agreed to the terms. Date it the day you actually sign it, never an earlier date.
Copies. Each person keeps a signed copy.

Does a promissory note need to be notarized?

No. No state we checked requires a notary or witness for an unsecured personal loan note or IOU; what's required is a writing signed by the borrower. A note is a signed written promise to pay, and notarization isn't part of that definition (UCC §3-103, §3-104). There's no IRS form to file or register a family loan or promissory note either.

What notarizing adds: easier proof in court. Under the federal rules, a document with a notary's certificate of acknowledgment is "self-authenticating", so nobody has to testify that the signature is real (Federal Rule of Evidence 902(8)). Hawaii, Iowa, Kansas, Minnesota, Montana and South Dakota have the same rule, and in California a notary's certificate is "prima facie evidence" that the signature is genuine (Evidence Code §1451). Even without a notary, in a lawsuit on a note each signature is treated as genuine unless the borrower specifically denies it (UCC §3-308). Small claims courts use simpler evidence rules: Colorado's courts say "the rules of evidence are less strict", and Connecticut's that "simple rules of evidence apply". A plain signed note is ordinary evidence there.

When a note must be in writing. Most states require a signed writing for a loan that can't be repaid within one year (the "statute of frauds"; California Civil Code §1624 is typical). Mississippi uses fifteen months. North Carolina, Louisiana, New Jersey and Pennsylvania have no one-year rule. A few states want certain loans in writing whatever their length: Connecticut any loan over $50,000, Virginia any promise to lend $25,000 or more, South Dakota any agreement for a loan of money (with exemptions for loans under two specific state laws), and Alabama any agreement to lend money except consumer loans under $25,000. Whether a family loan counts as a consumer loan under the Alabama law is unsettled; the law doesn't say. A signed note like the sample below meets all of these rules.

Filled sample: $3,000 over 12 months at 4.25%

Example: Rosa lends her brother Daniel $3,000 on October 5, 2026, for 12 monthly payments at 4.25% a year, the October 2026 short-term AFR. Monthly rate: r = 4.25% ÷ 12, about 0.354%. Payment: $3,000 × r ÷ (1 − (1 + r)⁻¹²) = $255.79. After rounding to the cent, the 12th payment is $255.81. Total repaid: $3,069.50, of which $69.50 is interest. (Charging 4.25% monthly is slightly above the minimum, which for monthly payments is 4.17%; that's fine.)

Promissory Note

Date: October 5, 2026
Borrower: Daniel Reyes, 12 Oak Street, Springfield, [State]
Lender: Rosa Reyes, 48 Elm Avenue, Springfield, [State]

1. Promise to pay

For value received, I, Daniel Reyes, promise to pay Rosa Reyes $3,000.00 (three thousand dollars), plus interest at 4.25% a year on the unpaid balance, as set out below. I received the $3,000.00 on October 5, 2026.

2. Payments

I will pay $255.79 on the 5th of each month, from November 5, 2026, through September 5, 2027, and a final payment of $255.81 on October 5, 2027. Total: $3,069.50. Each payment goes first to interest due, then to the balance.

3. How I'll pay

By bank transfer to Rosa's account ending [last four digits], or another way we both agree in writing.

4. Paying early

I may pay more, or pay off the balance, at any time with no penalty. Interest is charged only on the balance still owed.

5. If I can't pay on time

There is no late fee. If I can't make a payment, I'll tell Rosa before the due date, and we'll agree a new date in writing.

6. If payments stop

If I miss three payments in a row and we haven't agreed a new date in writing, Rosa may ask me to repay the whole remaining balance.

7. Copies

We each keep a signed copy of this note.

Daniel Reyes, borrower

Date signed: __________

Rosa Reyes, lender

Date signed: __________

Sample only. Not legal advice. No notary or witness is required; a notarized signature is easier to prove in court.

Payment	Paid	Interest	Balance after
1 (Nov 5, 2026)	$255.79	$10.62	$2,754.83
2 (Dec 5, 2026)	$255.79	$9.76	$2,508.80
6 (Apr 5, 2027)	$255.79	$6.25	$1,515.92
11 (Sep 5, 2027)	$255.79	$1.80	$254.91
12 (Oct 5, 2027)	$255.81	$0.90	$0.00
Total	$3,069.50	$69.50

Selected rows. Interest each month = balance × 4.25% ÷ 12, rounded to the cent. Rate from IRS Rev. Rul. 2026-19, checked 2026-09-27.

The tax side, in dollars

Interest the lender receives is taxable income, and the lender reports it even without a Form 1099-INT (IRS Topic 403); a family borrower doesn't file one. In the sample, Rosa receives $20.38 of interest in 2026 (payments 1 and 2) and $49.12 in 2027. Because the rate is at least the AFR, the below-market loan rules (tax code section 7872) don't apply. If a loan is never repaid, the IRS asks whether you meant it as a loan when the money changed hands (Topic 453); a signed note with a schedule helps show that. Questions about your own return: IRS Volunteer Income Tax Assistance (VITA) or a Low Income Taxpayer Clinic, both free.

Promissory note vs IOU vs loan agreement

IOU: an acknowledgment that money is owed. Under the Uniform Commercial Code, an acknowledgment isn't a promise unless the person also undertakes to pay. Fine for small, short loans: how to write an IOU.
Promissory note: the borrower's signed promise to pay a set amount on set dates. The middle option, and a good fit for a personal loan of a few hundred to a few thousand dollars.
Loan agreement: signed by both, with more terms on both sides (what the money is for, what happens if someone dies or moves, how disputes are handled). Worth it for larger loans: family loan agreement template.

Keep records

Both keep the signed note, and a photo or scan of it.
Pay by transfer where you can, with a memo like "Note payment 3 of 12".
The lender keeps a simple log: date, amount, interest, balance, like the table above.
If you change the terms, write the change down, date it the day you agree it, and both sign. Don't rewrite or re-date the original.
When the last payment is made, the lender writes "Paid in full" with the date on the borrower's copy and signs it.

Sources

Sources checked 2026-09-28.

General information, not legal or financial advice. You send every message yourself; we never contact anyone on your behalf.