Writing a Simple Promissory Note for Car (with Sample) Use this sample promissory note for car as a template for your formal promissory note. Last updated on January 15th, 2019
A promissory note is a legally binding document that contains the details of a loan transaction. A promissory note for car loan is an agreement by the buyer and the seller of the car that states the amount of the car loan and the details of how it will be paid.
This will include any interest charged and the payment schedule. The Note should also state any grace periods for late payments and penalties for defaulting or not making required payments.
A promissory note is different from an IOU. Even if an IOU is notarized, it may not be legally binding, and it will most likely not contain specific repayment details. With a loan as large as a car loan, a promissory note will be required. This gives the lender proof that the debt exists. There are unusual circumstances when a promissory note for car would not be legally binding. These include if the borrower were forced with extreme duress to sign the note, or if the lender signed a blank page, and the terms of the note were added later. The note would also not be binding if it contained any illegal content such as an impossibly high interest rate or penalties that are not clearly expressed in writing.
The promissory note should contain: • The full name, address and phone number or email address of the borrower and the lender • Specification that the owner of the car has the right to sell the car • The car’s VIN number, model, make and year of manufacture • The statement that the borrower promises to pay the lender a specific amount, how much each payment will be, the annual interest rate and when the loan will be completely repaid • Information related to any penalties that must be paid for late payments or default on the loan • As required by federal law, a vehicular odometer statement that sets out the car’s odometer reading at the time of transfer • Information on any penalties or not for paying the loan in full before the given final date such as repossession details or written notices for default on payment • Whether the title of the car will be held by the lender when the note is paid in full or will transfer to the borrower • Any collateral that will be held by the lender, if required, until the loan is repaid should be clearly stated
In some states, it is illegal for someone buying a private car to agree to take over an existing auto loan. It is necessary for the loan to be completely repaid and for the seller to be the lender to the new borrower. It is also recommended to sign the document in front of a Notary Public who will sign and seal the document. Copies of the Note should be given to the borrower and lender as well as a third party.
Below is a sample promissory note for car.
Promissory Note for Car Sample Name and Address of Borrower Name and Address of Lender Principal Amount of Car Loan
This Note is to document the sale of Make of Car, VIN number, model, year of manufacture owned by the Lender, who has the legal right to sell the car to the Borrower.
• The above Borrower promises to pay the above Lender the principal sum of AMOUNT OF LOAN with interest at the rate of PERCENTAGE OF INTEREST per annum that is calculated every year and not in advance.
• The Borrower will make monthly payments of AMOUNT on or by the fifth day of each month and this Note will be repaid in full on DATE at which time the Lender will transfer the title of the car to the Borrower with a recording of the odometer reading.
• This Note is constructed in accordance with the laws of the State of STATE.
• As long as the Borrower is not in default of payments, Borrower may pay the outstanding balance owed on the Note to the Lender without penalty or further bonus payments.
• If the payment is more than five days late, a penalty of AMOUNT will be added to the principal.
• Any legal costs that the Lender incurred because the Borrower was in default of payments will be added to the principal of the loan, and will be immediately paid by the Borrower.
• If any competent court holds any part of this Note to be invalid or void, both parties involved intend that the provision be reduced in scope only to the extent deemed necessary by the court and that the remainder of the provisions remain unaffected.
• This Note will be binding upon the heirs and successors of both the Borrower and Lender.
The Note is witnessed by the Borrower and Lender with signatures on this day of DATE.
Signature of Borrower ______________________________________ Printed Name of Borrower and DATE
Signature of Lender ______________________________________ Printed Name of Lender and DATE