Help Creating a NOTE

[Joshua Andrews]

I am in the process of loaning my brother money in regards to a partnership between us to purchase rental property. I would like to have a NOTE in place at the minimum APR just so we have something on file should I want my money back, etc.

I have never created a note before, and am unsure of the language needed. Can anyone advise where I would go to get this done inexpensively? I have contacted two title offices, and they seem to be of little help. I can have an attorney do it, but at $300 an hour for a two page document, it seems a bit steep. I will go that route if its absolutely necessary.

Any thoughts on how I would get this done or who I can use to help me create the note?

[Bill Gulley]

How much are you lending? The amount will dictate how involved it should be,

What are the terms? The heading on the note may need to reflect the type of note, ie, Balloon, Future Advance, Secured, Interest Only, Demand, etc.

Any security, collateral pledged?

It can be pretty simple;

DEMAND PROMISSORY NOTE 29 May, 2013

Be It Known That, Ima Debtoragain, a single person, resident of Anycounty, AZ. hereby agrees and promises, as the Maker of this Demand Promissory Note, to pay to the order of Joshua Andrews, 4321 Rich Street, Betterarea, Az., hereinafter as "Lender", the principal sum of five hundred U.S. Dollars ($500.00) together with interest thereon at the per annum rate of two percent until all amounts outstanding are fully paid. This debt created has no regular payment required and shall be due and payable upon demand by Lender. The Maker further agrees that in the event any payment is made, such being at the option of Maker, only payments in even dollar amounts greater than twenty four dollars shall be made with amounts paid being first applied to accrued interest and then to principal. Demand may be made by Lender for any amounts outstanding or for the full payment of amounts due, anytime after thirty days from the date hereof, and in the event any payment required is not paid as demanded within thirty days from the date of demand, the Maker shall thereafter be in default of this obligation. In the event of any default by Maker hereunder, the Maker further agrees to pay all costs of collection of amounts due to include, but not limited to, reasonable attorney fees and costs of court. Any demand or notice required in connection with this debt created shall be deemed to have been properly given to the party requiring such notice by certified mail, return receipt requested, to the address of such party requiring same as shown below respectively.

Maker waives rights of Notice of Demand, Presentment and Notice of Dishonor.

This Demand Promissory Note shall inrue to the benefit of, or obligation of, any heir(s), successor(s) or assigns.

THUS DONE and made as of the date first written above by Maker;

___________________
Maker, Ima Debtoragain
1234 Looser Ave
Badside City, AZ, 99900

Address For Lender:
Your Name
Address

Then have a Notary attest to the signature, not really necessary for small unsecured notes, but good practice.

That could be shorter, all you need as evidence of debt are the names of the parties, the date made, the amount, interest, payments if required and how to make them. It needs to be clear that it is a loan, that is done with the title and the standard phrase, "agrees to pay to the order of". Only the borrower or maker or any guarantor signs the note.

For a note that requires payments you simply state the payment amount, the date payments are required, the method of applying payments to interest, outstanding assessments (such as late fees) and principal amounts outstanding. You will also need to state the address where payments are to be made, what constitutes default and remedies for collections in default and late fees is any.

In setting interest rates check for usury laws and late fee amounts that may be charged, such applied to such limitations. Points are generally not allowed with private loans or loan fees.

Notes are deemed to be unsecured unless a security agreement is recited in the note or the collateral is described.

When collateral is assigned, insurance may be required. If insurance is required the security agreement will recite the matter and if in the body of any note, the insurance assigned should be at the option of the lender for the application of loss proceeds. Don't forget to be listed as a loss payee on any policy.

I agree with Jon, you should be able to dig up notes as a "go by" copy to see other agreements you may want. There may be state requirements for certain types of loans, usually those made by and between family members will often be exempt from lending laws, but if it is a large loan amount and there is any chance that the note might be sold, I'd suggest you be in compliance with lending requirements. :)