What a promissory note actually is
A promissory note is a one-sided IOU: the borrower’s unconditional written promise to pay a fixed sum, defined by the Bills of Exchange Act 1882. It’s a negotiable instrument — designed so a debt could be passed from merchant to merchant in 1882 — not a document built for a parent lending a house deposit in 2026.
Where the note runs out
The 1882 Act wants the promise in writing and signed by the maker — and because a note is a negotiable instrument, whether an electronic signature creates a valid note is genuinely contested, which is why careful practitioners still print and wet-sign them. A note also carries exactly one promise: the money. It says nothing about missed payments, early repayment, how interest accrues, or what happens if the borrower dies — the things families actually end up arguing about. A properly drafted loan agreement covers all of it, and an agreement e-signs validly in England and Wales.
Example: the £15,000 IOU that said too little
Dev lends his brother £15,000 on a two-line IOU: “I promise to pay Dev £15,000. Signed, Raj.” Eighteen months later they disagree about whether repayments were meant to be monthly or “when you can” — and the note is silent, so memory does the drafting. A one-page schedule with dates would have ended the argument before it started.
LendRight prepares full loan agreements — not promissory notes — on purpose. The agreement records the schedule, the interest method, the missed-payment rule and both signatures, and it e-signs validly. If someone hands you a free “promissory note template”, check what it doesn’t say.
What the agreement should pin down
- The amount and the date the money moves — with a payment reference on the bank transfer so the advance is provable.
- The repayment plan — instalments or a single date, and what happens if a payment is missed.
- Interest, if any. There’s no statutory cap between family members; the builder warns (never blocks) at 25%+. Remember interest you receive is taxable income.
- Loan, not gift — stated in terms. It protects the borrower’s siblings, the lender’s estate planning, and everyone’s memory.
- Signatures from both sides — electronic signing is valid in England and Wales, and it’s how LendRight finishes the job.
If repayment stalls
Money claims start online wherever you live — through Money Claim Online or the County Court Money Claims Centre — and claims up to £10,000 usually go to the small claims track, built for people without solicitors. If an in-person hearing is ever needed, it’s listed at a county court hearing centre convenient to the defendant, wherever in England and Wales they live. In practice, a signed agreement plus a bank record is usually enough to make the conversation end long before a courtroom.
Under the Limitation Act 1980 you generally have six years from a missed due date to bring a claim on a simple contract — one more reason the agreement should set real dates.
Scotland and Northern Ireland — a different story
If either of you lives in Scotland or Northern Ireland, the builder will tell you honestly that we can’t serve you yet — those are separate legal systems, and a template written for England and Wales isn’t automatically right there. Everything about that decision is on our coverage page.
Put it in writing — kindly.
Draft free in about 4 minutes. Pay the one-time £24.99 only when you send it for signing.
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