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A secured promissory note, as the name partially implies, is secured by some form of property (i.e. collateral), while an unsecured promissory note does not involve collateral. If the borrower defaults on a Secured Promissory Note, the lender gets to keep the collateral (the property that was used to secure the loan).
A promissory note must include the date of the loan, the dollar amount, the names of both parties, the rate of interest, any collateral involved, and the timeline for repayment. When this document is signed by the borrower, it becomes a legally binding contract.
Promissory notes are often used in real estate transactions, where they are often known as mortgage notes. These notes bind the borrower to an agreement where they promise to repay the funds received by a lender over time, with interest.
Promissory notes can be unsecured or secured by collateral, which is normally the asset that is purchased using the loaned money.
Promissory notes are legally binding whether the note is secured by collateral or based only on the promise of repayment. If you lend money to someone who defaults on a promissory note and does not repay, you can legally possess any property that individual promised as collateral.
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A home mortgage effectively secures a promissory note with the title to the property in question in case the lender should need to foreclose and sell the property in event of nonpayment. Your lender will keep the original promissory note until your loan is paid off.
Advantages of holding an unsecured note include: A promissory note may provide a higher interest rate, and therefore a greater return, than if you keep the money in your bank account. If you need money, you may be able to sell, or borrow against, the note.
Secured Promissory Notes The property that secures a note is called collateral, which can be either real estate or personal property. A promissory note secured by collateral will need a second document. If the collateral is real property, there will be either a mortgage or a deed of trust.
Promissory Notes. Homeowners usually think of their mortgage as an obligation to repay the money they borrowed to buy their residence. But actually, its a promissory note they also sign, as part of the financing process, that represents that promise to pay back the loan, along with the repayment terms.
Enforcing a secured promissory note is simply a matter of either repossessing the secured asset through your own efforts, or hiring a professional agency to accomplish the task on your behalf. These agencies will charge a set fee for their services, but they usually have a very high rate of success.

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