What Is Open Ended Promissory Note?

What is an Open ended Promissory Note?

If you are in search for the information about open-ended Promissory note, then you are on the right information track.

Open Ended Promissory Note

A promissory note can be said as a contract that shows that you have to pay back the loan. There is a different type of promissory notes such as demand note, open end note, simple note and installment note.

In other words, open ended promissory notes are called as a revolving note. The amount you have borrowed, to the date it will be given back to the lender is written in an open ended promissory note.

How does an open ended promissory note works?

The open ended promissory notes work in a way that with the line of credit, the borrower has the opportunity of taking draws up to a maximum amount.

That maximum amount is written in the promissory note. When the borrowers pay back the loan to the lender, he has the right to make additional draws.

He can make the additional draws till the time when he doesn’t exceed the line of credit.

Pros and Cons of open ended promissory note.

Everything has its pros and cons so does the open ended promissory note does. And, they are:


  • An open ended promissory note gives the advantage and flexibility to the borrower like other notes give more flexibility to the lender.
  • The borrower has this opportunity to give the promissory note to provide some repayment assurance. This is to the borrower’s friends and family who have given you the money.
  • You can use the promissory note to borrow the money when you don’t have sufficient and good credit.


  • The borrower might have to pay a lot of high interest rate on borrowing the money. An average rate of interest will be higher as compared to a secured loan.

Considerations of other notes:

Open Ended Promissory Note

Usually, all the notes represent specify the interest rate, an acceleration clause, costs of collection, conditions of default, prepayment provisions, and repayment schedule and the lender have the right to demand the borrower to pay the full amount of loan he is not able to fulfill the required payment.

Leave a Reply

Your email address will not be published. Required fields are marked *