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A promissory note is a legally binding agreement between a borrower and a lender that specifies repayment terms for money owed. There are two types: secured and unsecured. An unsecured promissory note offers no additional protection for the lender if the borrower defaults, making it a simple agreement accompanying a loan. In contrast, a secured promissory note includes collateral, such as an automobile, which protects the lender in case of default. If a borrower with an unsecured note defaults, the lender must pursue restitution through legal channels. The primary purpose of both types of notes is to clearly outline the borrower's commitment to repay the loan.