A promissory note due on demand is a legal instrument that documents one person’s promise to pay a sum of money to another immediately upon the lender’s request.
- Loaning money that you want returned upon request
- Borrowing money that must be returned upon request
A promissory note records a financial transaction that involves repayment upon a debt. The promissory note will include all relevant details of a debt, including the date by which the debt must be repaid, any fees or interest that may apply, the parties involved in the transaction, and all other terms and conditions of the loan. In circumstances where lenders want to be able to call in the debt at any time, promissory notes include a condition that the debt must be paid immediately following the lender’s request. This type of promissory note is a promissory note due on demand. A promissory note due on demand documents in writing your intent to repay a loan within a fixed time of receiving an official demand from your lender. This provides some additional protection to the lender against the risk of borrower default and can give the lender certain rights regarding legal enforcement if the parties end up in court. Promissory notes due on demand may be negotiated on a payment scale, but the borrower bears the risk of the lender calling in all of the remaining debt on the loan. If the lender so chooses, it can demand payment of the entire debt at any time during the term of the promissory note due on demand, unless the parties have expressly agreed otherwise. Regardless of whether you are the borrower or the person making the loan, promissory notes are an effective way to formalize a repayment agreement between two parties. Many common financial transactions, such as taking out a mortgage, require a promissory note as a matter of law or best practice, so a promissory note is a financial instrument that everyone should be aware of.