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A promissory note is a legally binding agreement between a borrower and a lender detailing repayment terms. There are two types: secured and unsecured. An unsecured promissory note provides no extra protection for the lender if the borrower defaults, unlike a secured promissory note, which requires collateral (e.g., an automobile). If a borrower fails to repay an unsecured loan, the lender must pursue legal action for restitution. The unsecured note simply lays out the borrower's commitment to repay the loan, including essential details of the agreement.