4 Mistakes to Avoid When Writing a Promissory Note

Last updated on April 13th, 2025 at 03:12 pm

Ever lent someone money and wished you had something in writing when things got complicated? That’s where a promissory note steps in—it’s more than just a piece of paper; it’s a legal promise to repay. But while it may sound simple, a few minor mistakes in writing one can lead to big headaches down the road. If you’re not careful, you could end up with an unenforceable document or unclear repayment terms. This guide explores what is a promissory note, common errors to avoid when drafting it, and how to get it right the first time.

 

1. Skipping the Basics: Missing Essential Information

It’s easy to overlook the fundamentals when you’re in a rush or trying to keep things informal. But forgetting to include key details like the loan amount, interest rate, repayment schedule, and due date can create confusion later.

Without this basic information, both parties may interpret the agreement differently, which can lead to misunderstandings or even disputes. It’s essential to clearly outline what’s expected and when—especially if the loan involves large sums or long-term payments. Think of the promissory note as a roadmap for repayment; if any key signpost is missing, things can go off track quickly.

 

2. Failing to Define the Repayment Terms Clearly

One of the biggest mistakes people make is being vague about how and when the money will be repaid. Simply stating “to be paid back soon” or “in a few months” isn’t helpful and can’t be enforced in court.

Be specific: include exact dates, payment intervals (monthly, quarterly, etc.), and whether the borrower will pay in a lump sum or installments. These clear terms help avoid confusion and ensure that both parties stay on the same page throughout the loan term.

 

3. Not Clarifying the Interest Rate or Leaving It Out

Whether or not you’re charging interest, this detail should always be spelled out in the note. Leaving it out may lead to assumptions, and depending on local laws, it might even affect the note’s validity.

Even if you’re lending money interest-free, write “0% interest” to avoid ambiguity. If you charge interest, specify the percentage and whether it’s simple or compound interest. This not only makes the agreement fair but also gives it legal weight if the borrower defaults.

 

4. Neglecting to Sign or Witness the Agreement

Believe it or not, one of the most common—and most avoidable—mistakes is forgetting to sign the document. A promissory note without signatures is like a contract without a handshake—it’s just not official.

The lender and borrower must sign the note to bind it legally. In some cases, having a witness or notarizing the note adds extra security and can be helpful if legal enforcement becomes necessary. Taking this extra step shows professionalism and protects both parties.

 

How to Write? Keep It Simple

It’s tempting to sound official using complex legal language, but that can backfire. If the parties don’t fully understand what they’re agreeing to, it defeats the purpose of the note. Instead, use simple, clear language that leaves no room for confusion. Even companies like Adobe rely on clarity when dealing with agreements—keeping things understandable helps avoid disputes and supports smoother financial relationships.

Writing a promissory note doesn’t have to be complicated, but it does need to be clear, complete, and correct. Avoiding common mistakes like skipping essential details, using vague terms, or forgetting signatures can save you time and stress later. Whether a loan between friends or a business deal, this document builds trust and protects everyone involved.