The terms of a vehicle promissory note may vary depending on the lender, but usually the borrower will have to make monthly payments over a period of time, typically two to five years. The interest rate on a vehicle promissory note may be fixed or variable.
If the borrower defaults on the loan, the lender may repossess the vehicle and sell it to repay the loan. The borrower may also be liable for any deficiency (the amount of the loan that is not repaid by the sale of the vehicle).
A vehicle promissory note is a legal document and should be carefully reviewed before signing. Borrowers should make sure they understand all the terms and conditions of the loan, as well as their rights and obligations.
Here is a step-by-step instruction on how to fill out a vehicle promissory note template.
Step 1 – The date of the promissory note
First and foremost, a promissory note should have the date when it was made. This is the date when the borrower and lender sign the promissory note.
Step 2 – The Borrower’s Information
The second section will ask for information about the borrower. This includes the name, address, and driver’s license number.
Step 3 – The Lender’s Information
The third section asks for information about the lender. This includes the name, address, and phone number.
Step 4 – The Loan Amount
The fourth section asks for the loan amount. This is the total amount of money that is being borrowed.
Step 5 – The Interest Rate
The fifth section asks for the interest rate. This is the percentage of the loan that will be charged as interest.
Step 6 – The Term
The sixth section asks for the term. This is the length of time over which the loan will be repaid.
Step 7 – The Monthly Payment
The seventh section of the promissory note asks for the monthly payment. This is the amount that will be paid each month to repay the loan.
Step 8 – The Collateral
The eighths section asks for the collateral. This is the vehicle that is being used as collateral for the loan. The details of this vehicle such as make, model, mileage, etc. should be provided in this legally binding document.
Step 9 – The Default Provisions
The ninth section of the promissory note asks for the default provisions. These are the terms that will come into effect if the borrower defaults on the loan.
Step 10 – The Repossession
The tenth section asks for repossession. The lender may have the right to repossess the vehicle if the borrower defaults.
Step 11 – The Deficiency
The eleventh section of the promissory note asks for the deficiency. The borrower may be liable for any deficiency if the vehicle is sold for less than the amount of the loan.
Step 12 – The Signatures
The twelfth and final section asks for signatures. The borrower and lender will need to sign the vehicle promissory note to make it legally binding.
In regular payments over time: You will make regular payments according to the payment schedule, typically monthly, over the term of the loan. In a lump sum: You may be able to pay off the loan in one lump sum payment. This is often possible if you sell the vehicle or come into some other windfall.
Early repayment: You may be able to repay the loan early, without penalty. This could save you money on interest if you can get a lower interest rate elsewhere.
Refinancing: You may be able to refinance the loan, which would involve taking out a new loan with different terms. This could give you a lower interest rate, a longer repayment period, or both.
Lump payment at maturity: You may have the option to pay off the entire loan in one lump sum payment at the end of the term, also known as a balloon payment.
Payable on demand : The loan may be due on demand, which means the lender can ask for the entire amount owed at any time. This is typically only used for very small loans.
A promissory note can be either secured or unsecured.
A secured promissory note are ones that are backed by collateral, such as a car or house. If the borrower defaults on the loan, the lender can seize the collateral and sell it to repay the loan.
An unsecured promissory note is not backed by any collateral. If the borrower defaults, the lender can sue the borrower to try to collect the amount owed, but they will not have any collateral to seize.
A promissory note should only be used when a buyer intends to make a down payment at the time of purchase.
As for a bill of sale, it should be used if the buyer intends to pay the rest of the price right away instead of paying it over time. If the buyer pays the full price on the sale date, no promissory note is needed.
Here are some of the key details that should be included in every vehicle promissory note:
The amount of the loan: This is the total amount of money that is being borrowed.
The interest rate: This is the percentage of the loan that will be charged as interest.
The term: This is the length of time over which the loan will be repaid.
The monthly payment: This is the amount that will be paid each month to repay the loan.
The collateral: This is the vehicle that is being used as collateral for the loan.
The default provisions: These are the terms that will come into effect if the borrower defaults on the car loan.
Repossession: The lender may have the right to repossess the vehicle if the borrower defaults.
Deficiency: The borrower may be liable for any deficiency if the vehicle is sold for less than the amount of the car loan.
Signatures: The borrower and lender will need to sign the vehicle promissory note to make it legally binding.