If you're ready to make the loan to a friend, acquaintance or family member, the formal document needs to be made. A clearly-written promissory note is a contract and should be fully enforceable in any court or arbitration hearing.

And, even more important, a promissory note clearly distinguishes your role as a lender and not a partner, trustee or co-signer.

A well written promissory note should state:

• the due (or maturity) date when the loan is to be repaid;
• any conditions under which the loan can be called for repayment before its due date;
• the name and address of the lender;
• the name and address of the borrower;
• the schedule of any payments to be made during the term of the loan;
• the date the loan was made;  
• the city and state in which the loan was made;
• the amount of money loaned;
• the nature of the payments (interest only, interest-plus-principal, balloon);
• the total amount due, including interest and principal;
• whether the note is transferrable and under what conditions it can be.