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A promissory note is a legally binding agreement between a borrower and a lender detailing the repayment terms for borrowed money. There are two types: secured and unsecured. An unsecured promissory note lacks additional protection for the lender, meaning if the borrower defaults, the lender must pursue legal action for repayment. In contrast, a secured promissory note requires collateral, such as an automobile or another asset, to safeguard against default. The purpose of an unsecured promissory note is to clearly outline the borrower's commitment to repay the loan, including specific details regarding payment terms.