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kelly's avatar

What is the difference/ benefits of a loan note being written as a "Demand Note" versus "Promissory Note"?

Asked by kelly (1908points) March 2nd, 2010

I am loaning money to a trusted friend and they will sign a note to make it OK for my accountant so she can deduct interest payments and I can claim them as income. I have two “stock” note formats one a Demand Note, the other Promissory Note. What are the benefits / risks for me.

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5 Answers

njnyjobs's avatar

Demand note is a promissory note that is due when you demand the payment, say within 30 days notice.

Promissory Note basically states when repayment will occur, a fixed date is actually stated on the document, i.e. payable on April 15 . . . or every 1st of the month for the next 6 months beginning on April 1.

semblance's avatar

ninyjobs is almost right. Actually, “promissory note” is a broad category that covers both payment obligations which have a fixed due date or payment schedule as well as a note which is payable whenever the holder demands it. So, a “demand note” is a specifc subcategory of the general category of promissory notes. A true demand note is theoretically payable immediately upon demand, although as ninyjobs says there may be a provision which gives the person who has to pay a short period of time in which to do so.

kelly's avatar

Thank community. Kelly

thriftymaid's avatar

Demand for full payment may be made anytime after a certain date. Promissory notes generally have fixed terms for repayment.

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