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A promissory note is a legally binding agreement between a borrower and a lender detailing the repayment terms of borrowed money. There are two types: secured and unsecured. An unsecured promissory note does not offer the lender any additional protection if the borrower fails to pay, while a secured note involves collateral (e.g., an automobile) to cover the debt if unpaid. If a borrower defaults on an unsecured note, the lender must pursue restitution through legal channels. The purpose of an unsecured promissory note is to clearly state the borrower's promise to repay the borrowed amount, and it includes essential details about the borrower.