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A promissory note is a legally binding agreement between a borrower and a lender that outlines the terms for a borrower to pay back money owed. There are two types of promissory notes either secured or unsecured when a promissory note is secured. Lenders have extra assurances if the debt is not paid, secured, promissory. A secured promissory note will include some form of collateral owned by the borrower. This is typically a valuable asset such as a motor vehicle or real estate, and helps to ensure that the lender will receive the value of their investment back in the event of default. The collateral may only be possessed by the lender. In the event of non-payment. When should I use a secured promissory note? In general, a secured promissory note can be used in any circumstance where money is. Its especially useful when the borrower does not have enough liquid capital to cover the entire amount of the loan. A secured promissory note isnt very helpful if the borrower does not possess