A Promissory Note is a written contract where one person promises to pay money to another. It is the document that EVERY personal or business loan should have — without it, recovering a loan between family, friends, or partners becomes nearly impossible. Bilingual, California-valid, ready in minutes. $99.
Use a Promissory Note when: you lend money to a family member (even a child or sibling), lend money to a friend or acquaintance, your business lends money to another business or to an employee, you receive money in exchange for paying it back later (loan from debtor side), you are closing a sale where buyer will pay in installments, or you need to formalize an existing undocumented debt. WITHOUT A PROMISSORY NOTE, California courts can consider the money a GIFT — and gifts do not have to be returned.
In California, private loans generally have a 10% annual interest cap under the California Constitution (Art. XV §1). Exceptions: home loans over $50,000, loans by licensed financial institutions, and loans not for personal use. If you charge over 10% without being in an exception, the loan is USURIOUS and you lose the right to collect ALL interest and possibly part of the principal. For real estate loans, you must use a Deed of Trust in addition to the Promissory Note.
Yes, but there are rules. The IRS requires charging at least the "Applicable Federal Rate" (AFR) — generally 4-5% in 2026 — if you do not want it considered a "gift" subject to taxes. If you charge less than AFR, the IRS can re-characterize the difference.
Not required in California for simple Promissory Notes, but HIGHLY recommended. Notarization: makes it nearly impossible to dispute the signature, adds credibility if you have to collect in court, and is required if the loan is secured by real estate (Deed of Trust).
With a valid Promissory Note, you can: (1) send formal Demand Letter, (2) sue in Small Claims Court (up to $12,500) or Superior Court for more, (3) if you have collateral on property, execute that collateral. Without a Promissory Note, almost impossible to collect legally.
The Promissory Note IS the legal document of a private loan. "Private loan" is the general concept; "Promissory Note" is the written contract that formalizes it.
Only $99. Without a Promissory Note, a $5,000 family loan can become a $5,000 loss + damaged family relationship.
Multi Servicios 360 is a self-help legal document preparation platform. We are not a law firm and do not provide legal advice.
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