A promissory note is paper evidence of a debt that a borrower owes a lender. It outlines the amount of the loan, interest rate and schedule for repayment, all of which are legally binding. The promissory note is issued by the lender, signed by the borrower, then witnessed and initialled by the lender.
In cases of more complex loans such as fixed-rate loans, the promissory note is embedded in the legal loan agreement. When multiple loans are established together (such as a fixed-rate loan, a demand loan and a line of credit), both a promissory note and a loan agreement may be created.