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How do I write a promissory note for a car loan?
My sister wants to buy my car, but she needs a loan to do it. Her credit is poor, so I was thinking of lending her the money to buy my car. Can I do this with a promissory note?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
You’re definitely a great sibling for this! Writing a promissory note for a car loan is both possible and a great way to do your sister a favor without putting yourself at risk.
A promissory note is a legally binding document that dictates the details of a
car loan
or other loans between two private parties, in this case, you and your sister. When you write the promissory note, make sure to contain the following information:- Name and address of the borrower and lender
- Model, year, make, and VIN of the vehicle
- Loan amount, interest rate, length of the loan, and maturity date
- Late fees and penalties
- Collateral information
- Odometer reading
- Whether the car will transfer to the borrower at loan maturity
You don’t need to have the promissory note notarized, but if it makes you more comfortable, go for it. In addition, you can get promissory note templates online if you’re unsure what to write.
You may also want to specify in the note if your sister is required to carry full coverage
car insurance
. Adding this to the promissory note will protect you if you choose to add the car as collateral.Since you’re helping your sister out, you may want to suggest to her to look on
Jerry
for car loan rates. She can sign up in less than a minute and compare rates to save her even more money.Best of luck to both of you!
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- Gregory R.
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