Free Unsecured Promissory Note Template

An unsecured promissory note is a written promise to repay a debt that is not backed by any specific collateral.

The lender’s protection is the borrower’s promise and whatever legal remedies follow from it. There is no vehicle to repossess and no property to sell; recovery means pursuing the borrower personally.

That makes it simpler to set up. No collateral to describe, no security to register, and no filings to complete, which is why most private loans between individuals take this form.

It also makes it riskier for the lender, and that risk is usually reflected in the amount, the term, or the interest rate.

The document still matters. An unsecured loan with a signed note is in a considerably better position than the same money handed over on a verbal understanding, because the terms are not in dispute.

An unsecured promissory note suits situations where formality would cost more than it protects.

• Loans between family members or friends.
• Small business loans from directors or shareholders.
• Short-term bridging between individuals.
• Advances against expected income or an anticipated payment.
• Formalising an existing informal debt that was never documented.
• Any loan where the borrower has no suitable asset to offer.

Where the sum is large relative to the borrower’s means, or the term is long, a secured note is usually worth the additional effort. Lending significant money unsecured on a handshake is how relationships and savings get damaged at the same time, and the paperwork is the cheap part.

An unsecured promissory note is short, but every number and date should be explicit.

The Parties

Lender and borrower, with full names and addresses.

Principal

The amount advanced and the date it was or will be provided.

Interest

The rate, how it is calculated, and when it accrues. State plainly if the loan is interest-free.

Repayment Terms

Instalments or a single sum, the schedule, and the final due date.

Prepayment

Whether the borrower may repay early without penalty.

Late Payment

Any grace period and what applies to a missed payment.

Default

What counts as default and what the lender may then do.

Acceleration

Whether the whole balance becomes due on default.

Governing Law and Signatures

Which law applies, plus signatures and the date.

A few things reduce the risk, none of which is a substitute for lending only what you can afford to lose.

Write it down regardless of the relationship. Undocumented family loans are the ones that end badly, because two people remember different arrangements in good faith.

Be realistic about repayment. A schedule the borrower cannot meet helps nobody, and a slower plan that completes beats a faster one that fails.

Consider a guarantor. Where the borrower’s own position is weak, someone else standing behind the debt is an alternative to collateral — though a guarantor should take their own independent advice before agreeing to anything.

Keep records of everything. The transfer, the signed note, and every repayment, because the burden of showing what was lent and what was repaid generally falls on whichever party is asserting it.

Tip: Decide in advance what you will do if it is not repaid, and be honest with yourself. If the answer is that you would never pursue a family member, treat the money as a gift and say so rather than dressing it up as a loan.

An unsecured promissory note takes about twenty minutes. Document Genius walks you through each section with simple questions.

1. Confirm the Exact Parties

Individuals or the correct legal entity.

2. State the Principal and How It Is Paid

Amount, date, and method.

3. Set Interest, or State There Is None

Being explicit either way.

4. Agree a Realistic Schedule

Instalments, frequency, and the final date.

5. Define Default and Acceleration

Plainly, without overstating remedies.

6. Both Sign and Keep Copies

Each party retains an executed original. Start yours now and have it ready today.

Even a simple loan can engage rules people do not expect.

Interest rates can be regulated. Limits on what may be charged, how it must be calculated, and how it must be disclosed vary by jurisdiction and sometimes by the type of lender, and an unenforceable rate provision can affect the wider agreement.

Lending can be a regulated activity. Depending on who is lending, to whom, and how often, licensing or disclosure obligations may apply.

Related-party lending has tax implications. Interest-free or below-market loans between family members, or from a director into their own company, can carry consequences for either side depending on the amounts involved.

Consumer borrowers may have added protections. Where the borrower is an individual, further rules may govern the terms and how the debt may be pursued.

Take advice from a lawyer and an accountant where the amount matters. Nothing here states any rate limit, licensing rule, or tax treatment.

Unsecured lending means recovery is a process rather than a remedy.

There is nothing to take. Without security, a lender’s route is to pursue the debt through whatever process applies, which takes time and costs money regardless of how clear the note is.

Talk first. Most missed payments have a reason, and a renegotiated schedule usually recovers more, faster, than an adversarial process would.

Put any variation in writing. An agreed payment holiday or reduced instalment should be documented at the time rather than assumed later.

Take advice before escalating. Time limits apply to enforcing debts, they vary considerably between jurisdictions, and leaving it too long can extinguish an otherwise good claim entirely.

Nothing on this page is legal, tax, or financial advice, and no rule on interest limits, lending regulation, consumer protection, taxation, or enforcement time limits is stated anywhere on it. Take advice from a qualified professional in your jurisdiction.