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A promissory note is a legally binding agreement between a borrower and a lender that details the repayment terms for a loan. There are two types of promissory notes: secured and unsecured. An unsecured promissory note offers no collateral, meaning if the borrower defaults, the lender lacks additional protection and must pursue restitution through legal means. In contrast, a secured promissory note involves collateral, such as an automobile, which the lender can claim if payments are not made. The purpose of both types of notes is to outline the borrower's commitment to repay the loan. Key elements included in the document detail the borrower’s obligations.