Any addition(s) or omission(s) as recommendation for the Promissory Note below?
I am planning to loan money to several people, and have them pay me in
installments but with interest. Any legal issues that I should
consider and know about before lending? Please advice me. Thanks

Promissory Note for Personal Loan
(Installment Payments With Interest)

Name of Borrower 1: ________________________________
Name of Borrower 2: ________________________________
Name of Lender: ________________________________

1. For value received, Borrower promises to pay to Lender the amount
of $ ___________ on ________________ [date payment is due] at
________________________________ [address where payments are to be
sent], together with interest at the rate of ___% per year from the
date this note was signed until the date it is [choose one]:
[   ] paid in full (Borrower will receive credits for prepayments,
reducing the total amount of interest to be repaid).
[   ] due or is paid in full, whichever date occurs last (Borrower
will not receive credits for prepayments).
2. Borrower agrees that this note will be paid in installments, which
include principal and interest, of not less than $ ___________ per
month, due on the first day of each month, until the principal and
interest are paid in full.
3. Security [choose one]
[   ] This is an unsecured note.
[   ] Borrower agrees that until the promissory note is paid in full
(including principal and interest, if any), this note will be secured
by a separate security agreement and, if applicable, Uniform
Commercial Code financing statement, giving Lender a security interest
in the following personal property:
_______________________________________________________
4. If any installment payment due under this note is not received by
Lender within __ days of its due date, the entire amount of unpaid
principal will become immediately due and payable at the option of
Lender without prior notice to Borrower.
5. If Lender prevails in a lawsuit to collect on this note, Borrower
agrees to pay Lender's attorney fees in an amount the court finds to
be just and reasonable.
The term Borrower refers to one or more borrowers. If there is more
than one borrower, they agree to be jointly and severally liable. The
term Lender refers to any person who legally holds this note,
including a buyer in due course.
6. Cosigner [choose one]
[   ] There is no cosigner for this note.
[   ] This note is cosigned by __________ and a separate cosigner
provision is attached.

Borrower 1's signature: ________________________________
Date: ________________________________
Print name: ________________________________
Location: ________________________________ [city or county where signed]
Address:	____________________
____________________

Borrower 2's signature: ________________________________
Date: ________________________________
Print name: ________________________________
Location: ________________________________ [city or county where signed]
Address:	____________________
____________________


Certificate of Acknowledgment of Notary Public

State of _______________________________	)
	)	ss
County of _____________________________	)

On _____________________, before me, ______________________________, a
notary public in and for said state, personally appeared
___________________ ________________________, known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument, and acknowledged to me
that he or she executed the same in his or her authorized capacity and
that by his or her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
	WITNESS my hand and official seal.
	_____________________________________
	Notary Public for the State of ______________
	My commission expires __________________
[NOTARY SEAL]

Hello and thank you for your question.

1.  The form you provide is for one loan made to two people.  And you
need to be able to look to either of them for payment in full (for
example, if they're business partners or husband and wife, if they
split up you would want to be able to collect from whichever of them
is available).

So the text of the note should say that "Borrower 1 and Borrower 2 are
hereafter referred to as 'Borrowers.'  [And from then on talk about
Borrowers, not Borrower]
And the  provision that "Borrowers shall be jointly and liable to
Lender for all payment of principal, interest and any other amounts
hereunder." Can go right at the start rather than the end.

That's also a lot easier than the Cosigner route which you can delete
- - just make any person who's willing to be cosigner sign on as one
of the borrowers, jointly and severally liable--and it eliminates
legal arguments about whether the cosigner/guarantor received legal
consideration for signing on.

2.  Based on your paragraph 2, I see the Borrowers will be paying
principal and interest with each installment, the way most mortgages
are paid.  So I don't think you can say that they "promise to pay to
Lender the amount
of $ ___________ on ________________ [date payment is due]"  --that
makes it sound more like a balloon loan, where they pay iterest only
during the term of the loan and the principal at the end.

3.  I also don't see the need for the choice between
 "(Borrower will receive credits for prepayments,  reducing the total
amount of interest to be repaid)"
and
 "(Borrower will not receive credits for prepayments)"
Assuming you don't mind being paid early, I'd strike both and just say
that the Borrower can prepay at any time, without penalty or premium,
any prepayment to be applied first to accrued interest if any and
thereafter to principal.
[if you do mind being paid early, you can add a prepayment penalty,
say 5% of any prepayment applied to principal)

4. Instead of "Borrower agrees to pay Lender's attorney fees in an
amount the court finds to be just and reasonable." just say
"Borrower agrees to pay all costs of collection includeing Lender's
reasonable attorney fees."
That way you don't need to have judge determine that the fees were in
fact reasonable.

Here's an alternative model for you to consider, which I've based on a form from 
http://www.delafe.com/form/frmmtgno.htm

-----------
                        PROMISSORY NOTE

$ _______________________      ________________________________
                                   (City)           (State)

                               ________________________________
                                           (Date)


     FOR VALUE RECEIVED the undersigned jointly and severally
promise(s) to pay to the order of ______________________________
________________________________________________________________
the principal sum of  __________________________________________
($ _________ ) Dollars together with interest thereon from date
at the rate of _________ (____%) percent per annum until
maturity, said principal and interest being payable monthly on
the _______ day of each and every month in lawful money of the
United States beginning on the ____ day of ___________ 19 _____,
in monthly installments of _______________________________ ($
_________), and continuing thereafter until _______________, or
until said principal and interest have been paid in full, at    
________________________________________, or at such other place
as the holder hereof may designate in writing from time to time.
 
     Each installment payment and any prepayment shall be credited first to the
interest then due, and the remainder to the principal.  This note can
be prepaid in whole or in part at any time without premium or penalty.
 
     Each maker and endorser severally waives demand, protest
and notice of maturity, non-payment or protest and all
requirements necessary to hold each of them liable as makers and
endorsers and, should litigation be necessary to enforce this
note, each maker and endorser waives trial by jury and consents
to the personal jurisdiction and venue of a court of subject
matter jurisdiction located in the State of ________________ and
County of ________________.
 
     Each maker and endorser further agrees, jointly and
severally, to pay all costs of collection, including a reasonable
attorney's fee in case the principal of this note or any payment
on the principal or any interest thereon is not paid at the
respective maturity thereof, or in case it becomes necessary to
protect the security hereof, whether suit be brought or not.
 
    This note is to be construed and enforced according to the
laws of the State of ______________; upon default in the payment
of principal and/or interest when due, the whole sum of
principal and interest remaining unpaid shall, at the option of
the holder, become immediately due and payable and it shall
accrue interest at a rate that is the lesser of of (i) ten percent
(10%) per annum or (ii) the highest rate allowable by law from the
date of default.

     Default shall include, but not be limited to non-payment
of any respective installment within ten (10) days from the due
date set out herein.
 
     Unless specifically disallowed by law, should litigation
arise hereunder, service of process therefor may be obtained
through certified mail, return receipt requested; the parties
hereto waiving any and all rights they may have to object to the
method by which service was perfected. 


_____________________________       ____________________________
Witness 

_____________________________       ____________________________
Witness


----------------------------

If the note is a secured note, just add a sentence to the note saying
that it is secured by a mortgage (or whatever) agreement between
Borrower to Lender dated ____, and any default under such agreement
shall constitute a default hereunder.
-----------------------------


Search terms used:
mortgage note


Thanks again for letting us help.

Sincerely, Google Answers Researcher
Richard-ga

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Request for Answer Clarification by thomaschico-ga on 04 Apr 2005 13:23 PDT

May i know your qualification to answer my question. 

btw, the promissory note i have presented is from a law firm,
www.nolo.com to be exact.

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Clarification of Answer by richard-ga on 04 Apr 2005 18:03 PDT

Hello again

Nolo has a good reputation.  Can you tell me which form of theirs you
used?  I am still concerned that the statement that $X will be paid on
[date payment is due] may be inconsistent with monthly amortization.
http://search.nolo.com/query.html?qt=promissory+note&col=a2whole&submit.x=24&submit.y=12

For qualification, my answer has been approved by an attorney admitted
to practice in New York State.  However, Answers and comments provided
on Google Answers are general information, and are not intended to
substitute for informed professional advice, and if you have consulted
an attorney of your choosing you would be better off following your
attorney's advice rather than Google Answers.

Regards,
Richard-ga

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Request for Answer Clarification by thomaschico-ga on 04 Apr 2005 19:18 PDT

I bought the form from here:
http://www.nolo.com/product.cfm/ObjectID/199FB549-30E5-453F-9B28151F8FB77F2F/213/208/

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Clarification of Answer by richard-ga on 04 Apr 2005 20:53 PDT

Aha!  That form calls itself "Installment Payments Without Interest"

I can't explain why they include "together with interest at the rate
of ___% per year" as part of the form, but I do suggest you consider
my form instead.  [I say 'my form' but you'll recall I followed a
different downloaded form, cited in my Answer, quite closely.]

-R