What does it mean to have a secured promissory note?

A secured promissory note means the loan is secured by an item of value, such as a house. Promissory notes are enforceable legal documents. The borrower can be sued if they default on the agreement and the loan’s terms. There are several types of promissory notes.

Can a promissory note be sold at a discount?

A promissory note can be either payable on demand or at a specific time. Certain types of promissory notes, such as corporate bonds or retail installment loans, can be sold at a discount—an amount below their face value.

What happens if you violate a promissory note?

Violations of usury laws may trigger serious civil consequences, such as the loss of any right to collect interest on the debt. Some violations may even result in criminal charges. The following legal terms may be used in a promissory note: Promisor: A promisor is the person who makes a promise.

Is there maximum rate of interest on promissory notes?

There are also usury laws that could affect a promissory note, which is the maximum rate of interest that may be charged to a borrower, and the IRS has something to say about promissory notes, too, especially those that charge no interest. If the promissory note is under a certain amount,…

What happens if a promissory note is not a security?

If the note is not a security, then the loan transaction can go forward without securities law compliance. Given the costs of securities law compliance, issuers want to avoid it whenever possible. Whether a promissory note is a security is one of the most vexatious issues in US securities laws.

What’s the interest rate on a promissory note?

Promissory notes can take on virtually any form. Here are just a few possible structures: $10,000 loan with 5 percent interest repayable at $250 per month until paid in full. $1,000 loan to be repaid in the amount of $1,200 after 24 months.

How long do you have to hold restricted securities before selling them?

Before you may sell any restricted securities in the marketplace, you must hold them for a certain period of time. If the company that issued the securities is a “reporting company” in that it is subject to the reporting requirements of the Securities Exchange Act of 1934, then you must hold the securities for at least six months.

What is Rule 144 for sale of restricted and Control Securities?

Rule 144: Selling Restricted and Control Securities. When you acquire restricted securities or hold control securities, you must find an exemption from the SEC’s registration requirements to sell them in a public marketplace. Rule 144 allows public resale of restricted and control securities if a number of conditions are met.