Promissory Note Payable on Demand
A promissory note payable on demand is a way to get repaid when you loan money to someone.3 min read
2. What Does Payable on Demand Mean?
3. Uniform Commercial Code
4. Promissory Notes
5. How Do I Write a Promissory Note?
6. Open-Ended Loans
A promissory note payable on demand is a way to get repaid when you loan money to someone. It is a document that states the terms of the loan and includes the “payable on demand” notation on it. This means that you can demand full payment of the loan at any time you deem necessary. It is also a useful document if the loan recipient defaults on the loan.
Promissory Note Due on Demand Basics
loaning money to a friend or family member can get tricky. While you want to help someone out, it can be upsetting if you do not get repaid.
A promissory note due on demand can help you feel more comfortable that you will be repaid on your own terms.
You can use this document if:
- You make a loan to another person
- You are borrowing from a private entity
- You want to create an amortization table
- You want to list the monthly payment amount for a loan
A due on demand promissory note lets you be in control of when you will be paid in full. It is helpful in getting more control on a loan made to someone close to you. It is different from other promissory notes because it is on demand. This means the full repayment is due as soon as you ask for it. It is also a legal contract that permits you to force payment if the borrower defaults. Included in this document needs to be the loan amount, the interest rate, and the date on which the loan has to be repaid.
You can choose your own interest rate. Keep in mind that many states will have regulation terms on the amount of interest you can charge. You need to make sure the interest rates you charge are fair.
What Does Payable on Demand Mean?
While you may see the phrase “payable on demand” on a variety of documents, it is generally seen primarily on promissory notes. It means that the payee has to be paid when asked. It does not have to be actually written on the document. A note without the time of payment specified on it is payable on demand.
Uniform Commercial Code
The Uniform Commercial Code has been enacted in most all states. According to the UCC, a promise is considered payable in two different circumstances:
- A note or order states it is payable on demand, on site, or however the holder deems necessary
- A promise or order does not list the payment due date.
An IOU is one example of a promissory note. They are also known as a loan agreement, a note payable, a demand note, and a commercial paper. It is a legal form that serves as documentation that a loan was made. It will enforce the borrower’s obligation to repay the money in a specific timeframe.
Promissory notes are used for:
- School expenses
- Loans made to family or friends
How Do I Write a Promissory Note?
- Identify the borrower and the lender
- Choose a payment plan. This includes a schedule for when it will be repaid and what types of payment you will accept.
- The amount of the loan, including interest if you choose to add it to the loan
- Collateral if you want to add some security to the loan. If the borrower defaults, you will become the owner of the collateral.
- Amendments to the agreement if necessary. These can only be made if you both agree to make changes
- Sign the promissory note
- Set up a collection method.
An open-ended loan is given in exchange for an on demand promissory note. This is beneficial for all involved.
The note can mean that the loan is not payable by the borrower until he or she has the money. For the person loaning the money, the note serves as a promise the loan will be repaid despite a structured schedule. This is a common situation, especially when it deals with family loaning and borrowing money.
If you need help with understanding promissory notes payable on demand and lending money to those close to you, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.