Promise to pay agreement

Signing a promise to pay

A creditor and a debtor execute a “promise to pay” agreement when the debtor undertakes to pay a certain amount of money on a certain date or dates. Usually, the first payment must happen within thirty (30) days from the date of the agreement. It mainly states which amounts are outstanding and the dates of payment.

Such an agreement is made when the debtor is behind in his payments or some payments are overdue. Like a joinder agreement, it is made by the parties after the parties execute the main contract to reflect new concessions. The creditor and the debtor, after reaching a concession, prepare a promise to pay. The agreement will serve as a formal lending arrangement to ensure repayment, rather than mere oral discussions.

The following conditions happen ahead of such an agreement:

  1. The creditor evaluates the contract and discusses the situation with the debtor,
  2. The creditor determines that the debtor is still capable of making further payments on the contract sum if the parties reach a concession.
  3. The debtor promises to pay a stated amount before the end of the month,

Features of Promise to Pay:

A promise to pay agreement is a form of promissory note. Like other promissory notes, make sure to detail the following items:

  • The parties
  • amount of debt outstanding,
  • the conditions under which the debtor will pay the money,
  • the number of payments
  • the interest rate (optional), and
  • what will happen if the debtor fails to pay in a timely manner.

Since the payment dates defined in the promise to pay are generally after the due dates of the items covered by it, the creditor may add charges and interest on late payments as part of the agreement.

Repayment terms.

It usually depends on the nature of the debt discussed in the promise to pay agreement.

For car loans and mortgages, the usual clause for repayment in a promise to pay is installment payment. The debtor decides to make regular incremental payments of the principal and interest involved to the creditor. Such clause is accompanied with details of the number of payments and dates of payments.

There are other ways to specify the repayment of a promise to pay. In smaller loans like payday loans, the parties may agree on a lump sum payment or once-and-for-all payment at a predetermined or ascertainable date. Thus, the payment date may be a certain date, upon demand by the creditor, or upon a date when a stated event will take place.

There can also be balloon payments: the borrower makes small payments of the principal and interest over the course of a loan, followed by one lump-sum payment to repay the remaining balance.

Effect of a Promise to pay agreement:

A promise to pay, as we earlier said, is a promissory note. Thus, the legal effects of a promissory note apply. It is a formal contract and is legally binding on the parties. It lies somewhat between the informality of an IOU and the rigidity of a loan contract.

The creditor in a promise to pay has a preference debt that is high-ranking to other creditors who reached oral agreements or an IOU with the debtor.


A Promise to pay contains a written undertaking by one party to make a payment of money at a specified date in the future. Individuals and corporate entities can freely prepare a promise to pay to confirm new terms for repayment of a debt. A lender can rely on the agreement to protect his loan transaction.

Standard promissory forms are available at office supply stores or on the Internet. However, if there are specifics you may require in your agreement not addressed on the standard forms, you might contact an attorney near you. Signing in front of a notary will further authenticate the document.

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