A promissory note is a written agreement under which one party agrees to pay another party a certain amount of cash on a future date. The date may be a fixed date sometime in the future, or on demand. The note typically contains the following information:
- Name of the payee
- Name of the maker (payer)
- The sum to be paid
- The interest rate that applies to the debt
- The maturity date
- The signature of the issuer and the date signed
The payee is the holder of a promissory note. Once the underlying funds have been paid to the payee, the payee cancels the note and returns it to the maker.
A promissory note differs from an IOU in that the note states the specifics of repayment, while an IOU only acknowledges that a debt exists.