An unsecured promissory note is a written promise to repay a loan that is not backed by any assets or property. It is a legally binding document in which one party promises to pay back another party a specific amount of money at a later date. The person who gives the loan is the “Lender.” The person who receives it is the “Borrower.” With no collateral, the lender mainly looks at the borrower’s credibility. A promissory note template comes in a secured and an unsecured version.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
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An unsecured promissory note fits best when the lender trusts the borrower to repay without collateral. It keeps the loan simple, because no property is pledged to back it. The note puts the amount, the rate and the payment plan in writing, so both sides can check the terms later. An unsecured promissory note is commonly used in these situations:
Because an unsecured note has no collateral behind it, the benefits and the risks look different for each side. The borrower keeps full use of their property and may pay a higher rate. The lender takes on more risk and may earn more. Read both lists before you agree on the terms.
For a borrower, an unsecured promissory note offers the following advantages:
An unsecured promissory note has the following disadvantages for a borrower:
From the perspective of a lender, an unsecured note offers the following advantages:
An unsecured note can have the following disadvantages for a lender:
A secured promissory note names an asset, such as a car or equipment, that backs the loan. An unsecured note does not, so the lender relies on the borrower’s promise and credit record. That difference changes the risk for the lender and often the interest rate, as the table shows.
| Point | Secured note | Unsecured note |
|---|---|---|
| Collateral | An asset backs the loan | No asset backs the loan |
| Risk for the lender | Lower | Higher |
| Typical interest rate | Often lower | Often higher |
| Common fit | Larger loans or weaker credit | Short loans between people who trust each other |
Filling in the template takes only a few minutes when you collect the details first. Agree on the numbers with the other party before you open the PDF, so you do not have to stop halfway through. Have these items ready:
The steps below follow the FormsPal unsecured promissory note template on this page, in the same order as the blanks on the form. Download the PDF and fill it in on your screen with the online PDF editor, or print it and write in the blanks by hand.
The screenshots under each step show the FormsPal Unsecured Promissory Note template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Date, principal amount, parties and interest rate
Write the full date of the loan on the Date line at the top left, for example November 20, 2026. Write the amount being lent after the $ sign on the Principal Amount line, for example 10,000. Enter the full names and addresses of both parties including city, state, and zip code. Mention the interest rate applicable. It should be in accordance with the maximum state limits. Write it as a yearly percent on the interest rate line.
Payment day: monthly or quarterly
Check one box only. If the installments are to be paid monthly, check the first box and write the day of the month on which installments will be paid. For example, “27th day of each month.” If they are to be paid quarterly, check the second box and write the day of the quarter on which payments will be made. A quarter is three months.
Payment amount or amortization, and maturity date
Check one box only. If the payment is to be made in installments of fixed amounts, check the first box. Calculate and enter the total installment amount after adding the interest and principal amount. If the loan is amortized to be paid over a number of years, check the second box and enter the number of years. Attach the amortization schedule to the promissory note. The amortization schedule can be calculated using a free amortization calculator.
Then write the maturity date of the loan on the Maturity Date line. All payments due must be made by this date by the borrower.
Indicate maturity date and governing law
Look back at the Maturity Date line from the last step to make sure it is filled in. On page 2, find the State line near the end of the note. Then, enter the state name whose code will be the governing law in case there are disputes between the parties.
Borrower signature block
Under BORROWER, sign on the By line, then print the Name and Title.
Lender signature block
Under LENDER, sign on the By line, then print the Name and Title.
Once the blanks are filled in, a few last steps turn the template into a signed record of the loan. Take your time with them, because the borrower and the lender will both come back to this page later.
A clear payment routine keeps the borrower and the lender on the same page. These habits help both sides follow the plan in the note, from the first payment to the last:
Borrowers and lenders often ask the same few things before they sign an unsecured note: how repayment works, what the lender can do after a missed payment, and whether the note counts as a security. The short answers below cover those points and a few form basics.
The following repayment options can be used in unsecured promissory notes:
Yes, unsecured promissory notes can be enforced under the law. Even if it does not have collateral security, it is still an agreement in which the borrower promised to pay back your money. It is still a legally-binding document. When a default is made by the borrower, the following actions can be taken by the lender:
The noteholder can also sell his note for cash, but instead of getting the full value of the note, the noteholder will receive a discounted value. The discount will mainly depend on the borrower’s credit rating, loan amount, and rates of interest. Usually, a note buyer discounts the note 10 to 35 percent of its face value.
The difference between a security and a promissory note is crucial. When a promissory note is termed security, securities law compliance can come into the picture. However, the determination of whether or not a promissory note is security is to be done after considering different factors:
Therefore, the question of whether or not an unsecured promissory note is security will depend upon the purpose of acquiring or issuing the note.
Unsecured notes that are issued for a term exceeding nine months to a number of different people who want to use them to make money or have some return on their investment will be considered as a security offering. Once it is clear that the promissory note is a security, it needs to follow and adhere to securities law compliances.
The maturity date is the day by which the whole loan, with any interest, is to be paid off. It sits on page 1 of the template, right after the payment choices.
A secured note is tied to an asset, and an unsecured note is not. The unsecured note relies on the borrower’s promise to repay, so the lender looks closely at the borrower’s credit record and history.
General information, not legal or tax advice.
