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This promissory note is a document that records a promise to pay a sum of money. It is a relatively simple document and is a good option where a person or company wishes to record a loan or promise to pay a small sum of money.
This document can record details of the borrower's and lender's names, the sum of money loaned (or credit extended), the interest charged by the lender and a timeline for the repayment of the money.
This document offers several repayment options including fixed instalments, repayment on a set date or repayment upon demand by the lender.
This document can be used for short-term, simple loans or offers of credit. For more complex loans, consider using our Loan Agreement. It is also important to note that if complex terms are written into this document, then it may fall under the Corporations Act 2001 (Commonwealth), meaning the parties may face additional legal obligations.
In addition, in certain circumstances, if the lender is in the business of providing credit, then the National Consumer Credit Protection Act 2009 (Commonwealth) may impose additional legal obligations.
How to use this document
The original document can be signed by the borrower(s) and then provided to the lender. The lender may sign the document as well. However, unlike a loan agreement, a promissory note will still be legally effective even if the lender does not sign it.
The lender can keep the original document until the loan has been repaid, and provide a copy to the borrower(s). The borrower(s) should retain a copy of this document so that they have a record of the terms of the loan.
If the loan is to be repaid on demand, the lender may demand payment by presenting this document to the borrower together with a written request for repayment of the loan.
Upon full repayment of the loan, the borrower may request that the lender write the words "Paid in Full" on the original copy of the promissory note and return it to the borrower.
Promissory notes are addressed in the Bills of Exchange Act 1909 (Commonwealth).
In some cases, if a promissory note deals with complex matters, the note may be deemed a complex financial product and may fall under the Corporations Act 2001 (Commonwealth) meaning that additional legal obligations may apply.
Importantly, if the lender is in the business of providing credit, and if the credit is provided for personal, domestic or household purposes, or for the purpose of purchasing, renovating or improving residential investment property, then the National Consumer Credit Protection Act 2009 (Commonwealth), including the National Credit Code (which can be found at Schedule 1 of that Act) may apply. This may also impose additional legal obligations. Further information is available on the website of the Australian Securities and Investments Commission. If in doubt, seek legal advice.
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