The Five Basic Types Of Promissory Notes (2026)

Secured Amortized Promissory Note

A secured amortized promissory note is secured by collateral, like a home or vehicle, and paid back in installments that include both interest and principal. "Amortization" refers to splitting regular payments between interest and principal.

Standard car loans and home loans both fall under this category. When a borrower agrees to finance a home or a car, they often promise to make equal monthly installments over a set period. The amount of the monthly payment stays the same, but the portion that goes toward principal vs. interest generally shifts over time.

With a typical amortization schedule, early payments tend to be more interest-heavy. Over time, more of each installment payment goes toward the principal.

Having the borrower pay more of the interest early on helps to protect the lender’s profit. If the borrower defaults later on, the lender can seize and sell the collateral to recoup the rest of the principal.

If you're looking to lend someone money secured by an asset, you can easily generate a secured amortized promissory note or an auto bill of sale promissory note form.

Unsecured Demand Promissory Note

With this type of promissory note, a borrower promises to repay the lender when the lender asks for repayment. It's not secured by collateral, but it's still legally binding.

Unsecured demand promissory notes are often used for quick loans between people who already trust one another. Because signing one requires you to repay what you’ve borrowed as soon as the lender asks, it’s not generally wise to sign an unsecured demand promissory note with a stranger.

Even if you're lending money to a friend or family member, you should still protect yourself. Generate your unsecured demand promissory note today.

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Unsecured Amortized Promissory Note

An unsecured amortized promissory note is a promise to repay a debt in installments split between interest and principal. The debt isn't secured by any type of asset.

This type of contract is often used for personal loans. Just like with secured amortized promissory notes, this kind of repayment schedule usually involves the borrower paying more interest early on. If you're planning on lending money, create your unsecured amortized promissory note with us first.

Secured Interest-Only Balloon Promissory Note

A secured interest-only balloon promissory note details a loan agreement where the borrower makes regular payments toward the interest on the loan. At the end of the loan term, they pay off the principal with a single "balloon" payment.

This may sound like an odd scenario, but there are some situations where balloon payments make sense. For example, if you're flipping real estate, you might repay interest while renovating and use the proceeds from selling the property to cover the balloon payment.

These types of promissory notes are also common in business lending. Because the borrower only has to make minimal payments at first, their cash flow is freed up to cover expenses. Once the business starts generating more profit, covering the balloon payment becomes easier.

Even in ideal scenarios, these payment arrangements aren’t without risk. For example, if a house flipper signs an interest-only balloon promissory note, there’s a chance that the value of the home could dramatically drop before the balloon payment becomes due.

Generate your secured interest-only balloon promissory note with us today.

Unsecured Lump-Sum Promissory Note

An unsecured lump-sum promissory note is usually used for short-term loans between friends or family members. With this agreement, the borrower promises to repay the full amount of the loan, plus any interest, by a specific date.

If you need to quickly lend someone a sum of money, create an unsecured lump-sum promissory note first.

Know Your Promissory Notes Before You Lend

A promissory note acts much like a detailed IOU. The correct type of promissory note can protect you if a borrower defaults. If you choose the wrong type, you might have more trouble recovering your money than you anticipated.

If you've never looked closely at promissory notes before, there can be a learning curve. But if you take the time to understand each type and when to use it, you'll be glad you did.