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A promissory note is a legal agreement between a borrower and lender detailing repayment terms. There are two types: secured and unsecured. Secured promissory notes provide lenders with additional security through collateral, which is typically a valuable asset like real estate or a vehicle. This collateral ensures that lenders can recover their investment if the borrower defaults. Secured notes are advisable when a borrower lacks sufficient liquid assets to cover the loan amount. However, if the borrower does not possess valuable collateral, a secured promissory note may not be beneficial.