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Creating Promissory Notes
Creating Promissory Notes

Have you ever considered creating your own promissory note? Carrying a note means owner financing. Did you know that you can do it and it is simple? No lawyer required. Remember this is how banks make their money - it is all in the power of compound interest - and you can do it too! There are free forms on line if you feel uncomfortable writing up your own.

A promissory note, in simply terms is a written promise to repay a loan per specific terms. Usually this is a stated time, through a series of payments or even upon demand.  Your promissory note must identify the parties that is both you and the other person or person clearly identified. It must also state the amount of the debt or obligation. It should also state what the obligation is for - what has been received in return for signing the note. You will also want to include your terms of repayment with whatever interest rate you will apply. You may want to include an "acceleration clause" which will make the entire amount due if a payment is missed. Finally, do a search and find out what the usury laws are for your state to make sure you do not get into trouble for the interest rate you are charging.

Now think about this....

You can owner finance a car you are selling. If you do not need a lump of cash on the spot, you will make more money by financing it with interest and a down payment. Once the note is written and signed, you simply put your name on the back of the title as the lienholder and when the buyer goes to the DMV you will then be listed as the lienholder of record.

Always make sure you have kept the originally signed note. Sign in blue so that it is clear that it is not a copy. Make sure to give the buyer a copy as well. Ideally you will also have a copy of their ID attached to your copy. You may even choose to create an application to collect information to include employer, landlord, whatever you feel important. If you are not sure what information to collect, go to a dealership and request an application to take with you. There should also be a clause at the bottom that the buyer will sign giving permission to collect their personal information. At the very least make sure to confirm their employment and landlord.

I recommend making notes with anyone, EVERYONE, that you loan money to, especially family. This will keep misunderstandings at a minimum.