Hello,
Promissory notes are technically legally binding contracts. These stipulate that one person intends to pay/repay a set amount of money to another by a specific date.
These are the advantages of promissory notes.
This is beneficial to the person the money is promised too, since it is legally binding so once the deal is sealed, the money legally must be paid.
- They allow time for repayment
This is beneficial to the borrower since there is a specified time frame to repay the money, so the deadline is not immediate.
- An element of flexibility involved
Arrangements can be made for repayments to be made in various different ways. This is also advantageous since it doesn't necessarily have to be one lump sum in one go!
These are the disadvantages of promissory notes.
- Borrows are not always reliable
The money for repayment must be found in some way, either earned or borrowed, and this can be tricky. The sources of lenders can be unreliable and this means that the promise to repay is always some what of a risk, depending on the circumstance.
- Costly lawyer fees, if necessary
In the event that the payment can not be met, the next necessary step is to take the case to court. Lawyer fees can be extremely costly, so it is definitely a disadvantage.
I hope this helps!
