What is a promissory note for delayed payment?
In a business world, by a promissory note, we mean a written promise by the borrower to the lender when the borrower has delayed the repayment of the borrowed money. It is a financial instrument that helps the borrower clearly state the definite amount of money he is supposed to pay and the date by which he should pay. A simple and commonly used promissory note includes all those details that a lender wants the borrower to include.
What details are added to a promissory note?
Some of the common details that a letter of promise must include are:
- A note of promise that affirms that the borrower is willing to pay the borrowed money
- The amount that he yet to be paid
- The date on which the payment will be made each month
- The yearly rate of interest
- Principal amount
- Signatures of the issuer
Importance of the note of promise:
In most businesses, a small personal loan is taken based on an agreement between the borrower and the lender. However, the situation the dispute arises when the borrower does not pay on time. When this happens, things can take a turn for the worse. To handle the situation, some borrowers choose to write a note with a promise. With this note, he makes the lender believe that he will clear the payment.
How to write a promissory note when the payment is late?
Late payment draws concerns not only for the lender but also for the loaner because it is a huge responsibility to pay back so that he can take a loan in the future also based on his credit history.
The promissory note becomes a legal document that the other party can use to express the commitment of the loaner. So, one should always be cautious so that no mistake is made.
Tell the reason for delayed payment:
The lender always wants to know as to why you failed to fulfill your commitment to making the payment on a particular date. So, mention the reason. Make sure that you have a genuine reason that makes sense.
Mention the due amount and name of the lender:
Write the name of the person who is entitled to receive the payment made by you and the amount that you are liable to pay. Also, tell if the mentioned amount includes the interest also. Discuss the amount that you have already paid for a better explanation.
Tell the mode of payment:
Different ways can be used to make the payment. You are not bound to use the method that you are not comfortable using. So, choose the mode that you find convenient and then let the lender know so that he can make several arrangements.
Write a promissory statement:
This is the most important part of the letter. Here you commit with the recipient to pay him the due amount. Here, you will write a date by which you will make the payment.
Read the sample below to see how a promissory note when the payment is delayed is written
Sample:
The payment of 300$ was due on my side on 10th October 20XX. However, I could not pay because of some very serious financial crisis I had to go through. I apologize for causing you inconvenience and assure you that this will not happen again.
To return the loan I have received, I promise to pay 2000$ to Mr. Johnson by 15th November 20XX. This amount is the total principal plus interest rate that I was supposed to pay upon delayed payment. I promise that I will clear all the due payments in the form of cash.
I understand the fact that the lender is allowed to transfer this note. Anyone who is entitled to transfer this note is called a note holder.
I assure you that I am ready to pay the agreed-upon interest on predefined rates on each payment that is to be made every month. I assure you that I will keep paying the interest until the full amount of borrowed money is paid back
Regards,
Name of the borrower
Signatures
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