Differences Between Secured and Unsecured Promissory Notes

Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Financial Legal Forms and other Legal Forms topics.

What is the difference between a secured promissory note and an unsecured promissory note?

Differences Between Secured and Unsecured Promissory Notes

Promissory notes are written promises to repay a debt. Promissory notes can be either secured or unsecured. Unsecured promissory notes are often referred to as signature loans and collateral is not required for unsecured loans. Personal loans typically represent unsecured promissory notes.

A secured promissory note is one that is secured by collateral of some type. Mortgage loans, for example, are secured by the home on which the loan is made. If a borrower defaults on his or her mortgage loan, the loan maker can foreclose on the house, thereby recovering part or all of the debt by taking possession of the item securing the loan.

When making an unsecured loan to an individual, it is important to realize that there is a very real possibility that the loan might not be repaid. If you are loaning more money that you can afford to lose, it is in your best interest to demand a secured promissory note.



Nobody has commented on this tip yet. Be the first.


URL: (optional)


Not finding the advice and tips you need on this Legal Forms Tip Site? Request a Tip Now!

Guru Spotlight
Jerry Mayo