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A promissory note is a legally binding agreement between a borrower and a lender that specifies the repayment terms for borrowed money. There are two types: secured and unsecured. An unsecured promissory note does not offer the lender any collateral for protection if the borrower defaults, leading the lender to seek restitution through legal means. In contrast, a secured promissory note is backed by collateral, such as an asset or automobile, which provides the lender with security in case of default. Both types serve as simple agreements detailing the borrower's commitment to repay the loan.