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A promissory note is a legally binding agreement between a borrower and a lender outlining repayment terms. There are two types: secured and unsecured. An unsecured promissory note does not provide the lender with collateral protection if the borrower fails to repay, meaning the lender may need to pursue legal action for restitution. In contrast, a secured promissory note includes collateral, such as an automobile or other valuable assets, which the lender can claim if the borrower defaults. Both note types serve as simple agreements detailing the borrower's commitment to repayment. Key elements included in the document specify the borrower's obligations.