Which promissory note should I draw up? Checklist

Checklist for Determining Which Type of Promissory Note Fits a Specific Situation

Table of Contents

• Purpose of the Loan
• Need for Transferability
• Security for the Loan
• Loan amount and Interest
• Party constellation
• Flexibility and Administration
• Example

Purpose of the Loan

• Private loan between friends/family: Simple promissory note
• Purchase of property or major assets: Mortgage debt
• Short-term loan for consumption: Consumer debt

Need for Transferability

• Does not need to be assigned: Simple promissory note
• May need to be handed over:
  • Easily transferred without hassle: Holder debenture
  • Transferred with formal declaration of transfer: Order promissory note

Security for the Loan

• No security: Simple promissory note or consumer debt
• Security in real property or other valuable asset: Mortgage debt

Loan amount and Interest

• Low amount, high interest: Consumer debt
• Larger amounts, collateral required: Mortgage debt

Party constellation

• Private individuals: Simple promissory note or consumer debt
• Business to business: Promissory note or mortgage debt

Flexibility and Administration

• Low administrative burden, high flexibility: Bearer bonds
• Formal and secure transfer process: Order promissory note

Example

• Situation 1: A private person lends money to a friend to buy a car.
  • Recommendation: Simple promissory note
• Situation 2: A company borrows money to buy a property and offers the property as collateral.
  • Recommendation: Mortgage debt
• Situation 3: A company lends money to another company with the possibility of assigning the debt to a third party.
  • Recommendation: Order promissory note
• Situation 4: A person uses a credit card and accumulates debt.
  • Recommendation: Consumer debt
• Situation 5: A company issues a short-term loan that can be resold on the market.
  • Recommendation: Holder debenture

Use this checklist to ensure that the right type of promissory note is chosen for each specific situation, providing legal certainty and clarity for all parties involved.