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A promissory note is a legally binding agreement between a borrower and a lender detailing the repayment terms for money owed. There are two types: secured and unsecured. An unsecured promissory note does not provide the lender with additional protection if the debt remains unpaid, while a secured note requires collateral, such as an asset, to secure the loan. In case of default on an unsecured note, the lender must seek restitution through legal channels. Both types of notes serve as simple agreements accompanying a loan, but the secured note includes collateral provisions, offering more protection to the lender. The document specifies the borrower's commitment to repayment.
