Promissory Note Sample for Car Loan

SECURED PROMISSORY NOTE AND SECURITY AGREEMENT (VEHICLE FINANCING)

Document ID: PN-AUTO-RE-2024-001
Effective Date: [Effective Date]
Version: 2.1 (Institutional Grade)
Governing Jurisdiction: [State/Province], [Country]

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STATUTORY & LEGAL COMPLIANCE NOTICE

IMPORTANT NOTICE TO BORROWER: This document is a legally binding contract. By signing this Promissory Note, you are incurring a legal obligation to repay a debt. This Note is secured by a specific motor vehicle. Failure to comply with the terms herein may result in the loss of the vehicle through repossession and a deficiency judgment against you. This document is intended to comply with the Uniform Commercial Code (UCC) and applicable state lending laws; however, specific state usury limits and consumer protection disclosures (such as Truth in Lending Act/Regulation Z) may require additional localized disclosures not contained herein.

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1. PARTIES AND RECITALS

1.1 THE PARTIES. This Secured Promissory Note (the "Note") is entered into on this [Date] (the "Effective Date") by and between:

BORROWER: [Borrower's Full Legal Name], residing at [Borrower's Principal Address] ("Borrower").

LENDER: [Lender's Full Legal Name/Company Name], residing at/having a principal place of business at [Lender's Principal Address] ("Lender").

1.2 LOAN AMOUNT. For value received, Borrower promises to pay to the order of Lender the principal sum of $[Principal Amount in USD] (the "Principal Amount"), together with interest on the unpaid principal balance at the rate and in the manner set forth below.

1.3 THE COLLATERAL. This Note is secured by a security interest in the following described motor vehicle (the "Vehicle"):

• Make: [Make]
• Model: [Model]
• Year: [Year]
• VIN (Vehicle Identification Number): [VIN Number]
• Odometer Reading: [Odometer]
• Title/Certificate Number: [Title Number, if known]

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2. OPERATIVE CLAUSES & LEGAL TERMS

2.1 REPAYMENT TERMS

Borrower shall repay the Principal Amount and interest in accordance with the following schedule:

• Interest Rate: The unpaid principal balance shall accrue interest at a rate of [Percentage]% per annum, compounded monthly.
• Payment Frequency: [Monthly/Bi-Weekly] installments.
• Installment Amount: Each payment shall be in the amount of $[Amount].
• First Payment Date: [Date].
• Maturity Date: The final payment, including all remaining principal and accrued interest, shall be due no later than [Date] (the "Maturity Date").

2.2 PREPAYMENT

Borrower reserves the right to prepay the unpaid Principal Amount, in whole or in part, at any time prior to the Maturity Date without penalty, premium, or additional fee. Any partial prepayment shall be applied first to accrued and unpaid interest, and then to the remaining Principal Amount.

2.3 LATE CHARGES AND DISHONORED PAYMENTS

If any installment is not paid within [Number] days of its due date, Borrower shall pay a late fee of $[Amount] or [Percentage]% of the overdue amount, whichever is greater, subject to applicable law. For any payment returned for insufficient funds (NSF), Borrower shall be liable for a processing fee of $[Amount].

2.4 SECURITY INTEREST (UCC ARTICLE 9)

To secure the payment and performance of all obligations under this Note, Borrower hereby grants to Lender a first-priority purchase money security interest in the Vehicle described in Section 1.3. Borrower authorizes Lender to file a financing statement (UCC-1) or record a lien on the Vehicle's Certificate of Title with the appropriate Department of Motor Vehicles or equivalent agency. Borrower agrees to execute all documents necessary to perfect this security interest.

2.5 MAINTENANCE OF COLLATERAL & INSURANCE

Borrower represents, warrants, and covenants that:

• Maintenance: Borrower shall maintain the Vehicle in good working order and repair.
• Insurance: Borrower shall maintain comprehensive and collision insurance on the Vehicle for its full insurable value, naming Lender as the "Loss Payee" or "Lienholder." Borrower shall provide proof of insurance to Lender upon request.
• Location: Borrower shall not remove the Vehicle from the [State/Province] for a period exceeding thirty (30) days without prior written consent from Lender.
• Liens: Borrower shall keep the Vehicle free and clear of all other liens, taxes, and encumbrances.

2.6 EVENTS OF DEFAULT

The occurrence of any of the following shall constitute an "Event of Default":

1. Failure to make any payment when due.
2. Failure to maintain required insurance coverage.
3. Transfer of ownership or sale of the Vehicle without Lender’s written consent.
4. The filing of bankruptcy or insolvency proceedings by or against the Borrower.
5. Death of the Borrower or destruction/total loss of the Vehicle.
6. Any material misrepresentation made by Borrower in this Note or the loan application.

2.7 REMEDIES ON DEFAULT (ACCELERATION)

Upon an Event of Default, and after any mandatory notice or cure period required by law, Lender may:

• Declare the entire unpaid Principal Amount and accrued interest immediately due and payable.
• Enter any premises where the Vehicle is located (to the extent permitted by law) and repossess the Vehicle.
• Sell, lease, or otherwise dispose of the Vehicle at public or private sale in accordance with the Uniform Commercial Code.
• Pursue a deficiency judgment against Borrower if the proceeds from the sale of the Vehicle are insufficient to satisfy the debt.

2.8 LIMITATION OF LIABILITY & INDEMNIFICATION

Lender shall not be liable for any damage to the Vehicle or any injury caused by the Borrower's operation of the Vehicle. Borrower agrees to indemnify and hold Lender harmless from any and all claims, losses, or liabilities arising out of the possession, use, or maintenance of the Vehicle.

2.9 DISPUTE RESOLUTION & ARBITRATION

Any dispute arising out of or relating to this Note shall be settled by binding arbitration in [City, State] in accordance with the rules of the American Arbitration Association. The prevailing party shall be entitled to recover its reasonable attorney's fees and legal costs.

2.10 GOVERNING LAW

This Note shall be governed by and construed in accordance with the laws of the State/Province of [State/Province], without regard to conflict of law principles.

2.11 MISCELLANEOUS PROVISIONS

• Severability: If any provision of this Note is held invalid, the remainder shall continue in full force.
• Entire Agreement: This Note constitutes the entire agreement between the parties and supersedes all prior discussions or agreements.
• Amendments: No amendment shall be effective unless made in writing and signed by both parties.
• Waiver: No waiver of any default shall be deemed a waiver of any subsequent default.
• Counterparts: This Note may be executed in counterparts, including electronic signatures.

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3. EXECUTION & FORMAL SIGNATURE BLOCKS

IN WITNESS WHEREOF, the parties have executed this Secured Promissory Note as of the Effective Date first written above.

FOR THE LENDER:

Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role, e.g., Individual Lender or President]
Company (if applicable): [Lender Legal Name]
Date: [Date]

FOR THE BORROWER:

Signature: _____________________________________
Printed Name: [Borrower Full Legal Name]
Title: Borrower
Date: [Date]

WITNESS / NOTARY (Recommended for Enforceability):

Signature: _____________________________________
Printed Name: __________________________________
Date: [Date]

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4. STEP-BY-STEP EXECUTION & FILING GUIDE

1. Field Completion: Open this document in Microsoft Word or Google Docs. Use the Find and Replace function to locate all bracketed text (e.g., [Borrower's Full Legal Name]) and replace it with the specific details of your transaction.
2. Verify VIN: Ensure the Vehicle Identification Number (VIN) is verified directly from the vehicle's dashboard or door jamb to prevent identification errors that could void the security interest.
3. Signatory Authority: If the Lender is a corporation or LLC, ensure the person signing has the legal authority (e.g., Corporate Resolution) to bind the entity.
4. Digital Execution: If using DocuSign or Adobe Sign, ensure the "Audit Trail" feature is enabled to provide a record of IP addresses and timestamps for each signature.
5. Lien Perfection (CRITICAL):
   • Step A: In the United States, file a UCC-1 Financing Statement with the Secretary of State in the Borrower's state of residence.
   • Step B: Submit a "Lien Filing" or "Title Application" to the local DMV naming the Lender as the primary lienholder. The physical title should ideally be held by the Lender until the loan is paid in full.
6. Record Retention: Maintain the original signed Note in a fireproof safe. Provide a digital and physical copy to the Borrower. Retain all records of payments, late notices, and insurance certificates for at least seven (7) years after the loan is satisfied.
7. Satisfaction of Note: Once the loan is paid in full, the Lender must sign a "Release of Lien" and provide it to the Borrower within the timeframe mandated by state law (usually 15–30 days) to allow the Borrower to clear the title.