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Interest Only Promissory Note Template for England and Wales

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Key Requirements PROMPT example:

Interest Only Promissory Note

"I need an Interest Only Promissory Note for a £500,000 business loan to my property development company, with quarterly interest payments at 7.5% per annum and full principal repayment due on 30 June 2025, secured against commercial property in Manchester."

Document background
An Interest Only Promissory Note is commonly used in England and Wales when parties wish to structure a loan where only interest payments are required until maturity. This document is particularly useful for situations where the borrower expects a future liquidity event or prefers lower periodic payments. The note must comply with UK financial regulations, including the Consumer Credit Act 1974 and Financial Services and Markets Act 2000. It typically includes detailed terms about interest calculations, payment schedules, default provisions, and any security arrangements. This type of note is frequently used in real estate financing, business loans, and private lending arrangements.
Suggested Sections

1. Date and Parties: Date of execution and identification of lender and borrower with full legal names and addresses

2. Principal Amount: Statement of the amount being borrowed, expressed in both numbers and words

3. Interest Rate and Calculation: Specification of the interest rate, calculation method, and payment frequency

4. Payment Terms: Details of interest payment schedule and principal repayment at maturity

5. Maturity Date: Specification of when the principal amount becomes due

6. Representations and Warranties: Standard declarations regarding capacity, authority, and legality

7. Governing Law: Specification that the note is governed by English and Welsh law

8. Execution: Signature blocks and execution formalities

Optional Sections

1. Security Provisions: Details of any collateral or security arrangements securing the note

2. Default and Acceleration: Terms specifying events of default and consequences, including acceleration rights

3. Prepayment Rights: Terms governing early repayment rights and any associated penalties or conditions

4. Assignment and Transfer: Provisions regarding the transferability of the note and any restrictions

5. Notices: Communication requirements and contact details for formal notices

Suggested Schedules

1. Schedule 1 - Interest Payment Schedule: Detailed schedule showing dates and amounts of interest payments

2. Schedule 2 - Interest Calculation Methods: Detailed explanation of interest calculation methodology including day count conventions

3. Schedule 3 - Security Details: Description and particulars of any security or collateral (if applicable)

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions

























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Relevant Industries
Relevant Teams
Relevant Roles
Industries

Consumer Credit Act 1974: Primary legislation governing consumer credit agreements. Must be considered if the borrower is a consumer, covering aspects of credit regulation, licensing, and consumer protections.

Financial Services and Markets Act 2000: Establishes the regulatory framework for financial services in the UK, including lending activities and regulatory oversight.

Law of Property Act 1925: Fundamental legislation governing property rights and securities in England and Wales, relevant for secured promissory notes.

Limitation Act 1980: Sets statutory time limits for bringing legal actions to enforce debts and other claims under the promissory note.

FCA Regulations: Financial Conduct Authority rules and guidelines governing regulated credit activities and lending practices.

Consumer Credit sourcebook (CONC): Detailed rules and guidance for firms carrying out consumer credit activities, including requirements for documentation and disclosure.

UK Money Laundering Regulations 2017: Requirements for due diligence and verification procedures in financial transactions to prevent money laundering.

Late Payment of Commercial Debts (Interest) Act 1998: Legislation governing interest charges on late payments in commercial transactions.

Consumer Rights Act 2015: Key legislation protecting consumer rights and defining unfair terms in consumer contracts, including provisions about interest rates and charges.

Unfair Contract Terms Act 1977: Controls the use of exclusion and limitation clauses in contracts, ensuring fairness in contractual relationships.

Unfair Terms in Consumer Contracts Regulations 1999: Protects consumers against unfair standard terms in contracts, including those related to interest rates and payment terms.

Consumer Protection from Unfair Trading Regulations 2008: Prohibits unfair commercial practices and requires transparency in business-to-consumer transactions.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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