Promissory Note Collections

A Promissory note is a contract detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee). The obligation may arise from the repayment of a loan or from another form of debt. For example, in the sale of a business, the purchase price might be a combination of an immediate cash payment and payments against one or more promissory notes for the balance.

 

  The big difference between a promissory note and a regular written contract is that the scheduled payments and interest on the loan also is spelled out in the promissory note. A mortgage is a promissory note.

 

  The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. Sometimes there will be provisions concerning the payee's rights in the event of a default, which may include foreclosure of the maker's assets.

 

  The Collection Demand Letter is a Promissory Note companion document legally advising the borrower of a late / default payment owed to the lender within a specified period of time. When completing a Promissory Note, an Installment Note also may accompany the original document to explain the payment schedule (amounts and dates) associated with a loan of money or exchange of personal property. This documentation will prove helpful in the event the lender must prepare a Collection Demand Letter for presentation or delivery to the borrower.

 

A Collection Demand Letter document will typically specify the following:

 

• Full, legal name of borrower

• Date of original loan transaction (from Promissory Note)

• Payment due date (established on Promissory Note and / or Installment Note)

• Past due payment amount (established on Promissory Note and / or Installment Note)

• Signature of lender

 

  The simple version of the Collection Demand Letter will provide a written form of notification using the above referenced information. However, the Collection Demand Letter will simply state the borrower?s payment has not been received by the lender and is now due.

 

  An expanded version of this letter will provide the lender a written form of notification to the borrower of a late payment, as well as a demand for payment in full within a specified period of time. Depending on the specific language of the Collection Demand Letter, it may require of the borrower to immediately pay all principal, interest and any fees related to the original loan within the previously specified period of time. Additionally, notification of penalties, accrued interest and any applicable attorney?s fees related to recovery also may be imposed.