Promissory Note (Forgivable Loan)
Overview of this form
A Promissory Note (Forgivable Loan) is a legal document used primarily for employer-employee transactions, where an employer lends money to an employee, typically for relocation expenses or housing purchases. This type of note specifies that the loan may be forgiven under certain conditions, such as continued employment. It stands apart from standard promissory notes due to the forgiveness aspect tied to the employee's job performance and employment duration.
Main sections of this form
- Loan Details: Includes the principal amount and payment address.
- Forgiveness Schedule: Outlines when the principal amounts will be forgiven based on the employee's continued employment.
- Due Date: Specifies when the entire loan becomes payable, which can be triggered by employment termination.
- Purpose of Loan: States the intended use of the funds to aid relocation.
- Default Clause: Describes the consequences if the employee fails to repay the loan.
- Legal Fees: Addresses the obligation to pay legal costs in case of collection actions.
When to use this document
This Promissory Note is used when an employer extends a loan to an employee, usually during their onboarding process or relocation to a new area for work. It is ideal for situations where the employer wants to assist the employee financially while also retaining an incentive for the employee to remain employed, as portions of the loan are forgivable based on their length of service.
Who needs this form
This form is suitable for:
- Employers wishing to provide relocation assistance to new hires or existing employees.
- Employees who are receiving a loan as part of their employment terms.
- HR professionals looking to formalize financial assistance agreements with employees.
How to prepare this document
- Identify the parties involved: the employer and the employee.
- Clearly state the total loan amount being provided.
- Specify the forgiveness schedule with amounts and relevant dates.
- Detail the purpose of the loan and how the funds will be utilized.
- Include any clauses regarding default and legal fees that may arise.
- Both parties should sign the form to validate the agreement.
Does this document require notarization?
In most cases, this form does not require notarization. However, some jurisdictions or signing circumstances might. US Legal Forms offers online notarization powered by Notarize, accessible 24/7 for a quick, remote process.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes
- Failing to clearly specify the amounts to be forgiven and the associated dates.
- Not including the purpose of the loan, leading to potential misuse of funds.
- Overlooking the need for signatures from both parties, which invalidates the agreement.
Why complete this form online
- Convenience of accessing and downloading legal forms from home.
- Editability to customize the form according to specific loan terms.
- Reliability in using templates drafted by licensed attorneys to ensure compliance with legal standards.
Legal use & context
- This form binds the employee to repay the loan unless forgiven under the stated conditions.
- Proper documentation is crucial for both parties to avoid misunderstandings regarding loan terms.
- The form should comply with state-specific laws regarding loans between employers and employees.
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FAQ
If the sum is not huge and the relationship is trustworthy, it is preferred to go with a promissory note to avoid potential legal issues. However, if the sum of money is huge and the relationship is not entirely trustable, make sure to use a secured loan agreement to ensure your money is safe with the borrower.
Contrary to a Promissory Note, which is an unconditional promise to repay money, a Forgivable Loan Agreement, or FLA, states that a specified portion of the new employee's loan balance will be ?forgiven.? Presented at the time of recruitment, the FLA differs from a Promissory Note in that a certain percentage of the
In the housing industry, a forgivable loan is a type of second mortgage. You don't have to pay this type of loan back unless you move before your loan term ends. These loans usually come with an interest rate of 0%, so it could be an excellent solution for lower-income homebuyers.
In the housing industry, a forgivable loan is a type of second mortgage. You don't have to pay this type of loan back unless you move before your loan term ends. These loans usually come with an interest rate of 0%, so it could be an excellent solution for lower-income homebuyers.
A forgivable loan, also called a soft second, is a form of loan in which its entirety, or a portion of it, can be forgiven or deferred for a period of time by the lender when certain conditions are met.
The debt owed on a promissory note either can be paid off, or the noteholder can forgive the debt even if it has not been fully paid. In either case, a release of promissory note needs to be signed by the noteholder.
A lender uses a promissory note as a way to ensure there is legal recourse if you do not repay the loan.
Promissory notes and loan agreements are both documents detailing the terms and conditions of a loan. Promissory notes are typically for smaller loans between people with a personal or business relationship, while loan agreements are typically more formal agreements for larger, conventional loans.