Free Secured Promissory Note Template

A secured promissory note is a written promise to repay a debt, backed by specific property that the lender can look to if the borrower does not pay.

The security is what distinguishes it. An ordinary promissory note is a promise; a secured note attaches that promise to an identified asset — a vehicle, equipment, inventory, or real property — which the lender may be able to take or sell on default.

That changes the risk for both sides. Lenders generally accept lower interest and larger sums against security, and borrowers accept that a specific asset is on the line.

It is common wherever the amount is significant relative to the borrower’s means: vehicle finance, equipment purchases, business lending, and private loans between individuals where the lender wants more than a promise.

This is the part that most often goes wrong, and it is why a template alone is not enough.

Describing collateral in the note does not by itself give a lender enforceable rights over it. Taking effective security usually involves additional steps outside the document — registration, filing, or recording, depending on the asset and the jurisdiction.

Skipping those steps can leave a lender unsecured in practice. A note that describes collateral but was never properly perfected may leave the lender ranking alongside ordinary creditors if the borrower fails.

What must be done, where, and by when differs by asset type and location, and it can be time-sensitive.

Take advice from a lawyer in the relevant jurisdiction before you rely on security. This page states no registration requirement, no filing deadline, no priority rule, and no enforcement procedure anywhere.

A secured promissory note needs to describe the debt and the collateral with equal precision.

The Parties

Lender and borrower, with correct legal names and addresses.

Principal and Interest

The amount advanced, the rate, how interest is calculated, and when it accrues.

Repayment Terms

Instalment amount, frequency, first payment date, and maturity date.

Prepayment

Whether early repayment is permitted and on what terms.

Description of Collateral

Identified specifically: serial numbers, registration details, or a legal description of property.

Grant of Security Interest

An express statement that the borrower grants the lender security over the described asset.

Borrower Obligations

Maintaining, insuring, and not selling or further encumbering the collateral.

Default and Remedies

What counts as default, any cure period, and what the lender may do.

Governing Law and Signatures

Which law applies, plus signature blocks and any witnessing or notarisation required.

Both sides should understand that taking collateral is not a self-help exercise.

Repossession and sale are governed by rules. What a lender may do on default, what notice must be given, how collateral must be sold, and what happens to any surplus or shortfall are all set by law and vary considerably.

Getting it wrong exposes the lender. Improper repossession can create liability, and it can cost a lender rights it would otherwise have had.

Consumer borrowers usually have additional protections. Where the borrower is an individual rather than a business, further rules may apply to the loan itself, the interest charged, and the way any enforcement must be carried out.

Insurance matters. Requiring the borrower to insure the collateral, and to name the lender on the policy, protects the security against the obvious risk of the asset being damaged or destroyed before the debt is repaid.

Tip: If you are lending privately against a vehicle or equipment, ask a lawyer what you must do to make the security effective and what you may lawfully do on default. Both answers are jurisdiction-specific and neither is obvious.

A secured promissory note should be reviewed before signing. Document Genius walks you through each section with simple questions.

1. Settle the Commercial Terms

Amount, rate, instalments, and maturity.

2. Describe the Collateral Precisely

Specific enough to identify it beyond doubt.

3. Include the Grant of Security

And the borrower’s obligations to maintain and insure it.

4. Define Default and Remedies

Without asserting rights you may not have.

5. Take Advice on Perfecting the Security

And complete whatever filing applies.

6. Sign, Register, and Keep Records

Both parties keep an executed copy. Start yours now and have a draft ready for review.

Choosing between the two is a commercial decision with legal consequences.

Security lowers the lender’s risk, which usually means a lower rate, a longer term, or a larger advance than an unsecured loan would support.

It raises the stakes for the borrower. Default can mean losing a specific asset, which may be a vehicle they need or equipment the business runs on.

It is more work to set up. Perfecting security takes time and often costs money, which is why small short-term loans are frequently left unsecured even where an asset exists.

Priority matters where other creditors exist. Whether a lender ranks ahead of others generally depends on the security being properly taken and recorded, rather than on the date the loan was made.

Neither option is universally right. The question is whether the amount and the term justify the additional formality.

Administration is what keeps the arrangement working.

Record every payment. A running schedule showing date, amount, and outstanding balance prevents most disputes before they start.

Confirm the insurance stays in place. Lapsed cover on collateral is a common and avoidable exposure.

Put any variation in writing. Payment holidays and extended terms agreed verbally are remembered differently later.

Release the security when the note is paid. The borrower will need the discharge, and it is easier to deal with promptly than years afterwards.

Nothing on this page is legal or financial advice, and no rule on security registration, priority, repossession, notice, consumer protection, or interest is stated anywhere on it. Take advice from a lawyer in your jurisdiction.