How to Secure a Promissory Note

A promissory note is a legal, written document that is essentially an IOU. Thus, someone such as a friend, family member or business partner promises to pay money-in writing-that they've borrowed from you. You have 2 options when it comes to choosing promissory notes. For instance, you can have an unsecured promissory note where the person promises to repay you in a certain amount of time. Your section option is called a secured promissory note. Typically, a secured promissory note is used when property owners are borrowing money to pay for a house or other items. In this case, you need to know how to secure a promissory note.


  1. Image titled Secure a Promissory Note Step 1
    Understand secured promissory notes.
    • A secured promissory note is backed by collateral, also called property, that guarantees payment. If the debtor, or person to whom you loaned the money, doesn't pay, then you can take possession of the collateral.
  2. Image titled Secure a Promissory Note Step 2
    Know the types of property that can be used as collateral.
    • Intangible personal property a person can use as collateral includes assets like stocks, rights to a business, copyrights, patents and trademarks.
    • Real estate can also be used as collateral.
    • Tangible personal property a person owns can be used as collateral to secure a promissory note. Tangible personal property usually includes items like jewelry, cars, computers, stereos, DVDs, televisions or computer software.
  3. Image titled Secure a Promissory Note Step 3
    Discuss terms of the agreement with the debtor. This must be done before handing over any money.
    • Negotiate with the debtor how much he or she can borrow and what type of collateral you'll accept.
  4. Image titled Secure a Promissory Note Step 4
    Write up the terms of the agreement.
    • The agreement should include whether the payments are in 1 lump sum or in installments, when the payment or payments are due and any interest and late fees. Also, you should list the collateral that is making the promissory note secure.
  5. Image titled Secure a Promissory Note Step 5
    Sign the agreement in front of a notary.
    • Typically, there are notaries at banking institutions.
  6. Image titled Secure a Promissory Note Step 6
    Provide a copy of the notarized secured agreement to the debtor.
  7. Image titled Secure a Promissory Note Step 7
    You can only collect collateral on the secured promissory note if the person that owes you the money defaults or fails to pay.


  • Consult a lawyer if you plan to accept collateral such as intangible personal property and real estate. For instance, if you use real estate as collateral, you should have a deed of trust or mortgage along with the secured promissory note.

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Categories: Official Writing and Complaints