How to Secure a Promissory Note
Attach the collateral to the loan., Note the loan and security interest on the vehicle title., Complete the lien section on the Title Certificate., File the documents with the appropriate governmental office.
Step-by-Step Guide
-
Step 1: Attach the collateral to the loan.
To “attach” collateral is a legal term that means you must identify the specific property that will be the collateral for the loan.
A motor vehicle is pretty easy to identify, by its Vehicle Identification Number (VIN) and by a brief description of the make and model.
As the lender, you will need to have your borrower sign a security agreement that contains this description and makes reference to the loan.A sample of a security agreement designed for a loan secured by a motor vehicle is available at http://www.ccclerk.org/SECURITY_AGREEMENT.pdf. (This particular sample is from the State of Ohio, but the general form is effective in any U.S. state.) -
Step 2: Note the loan and security interest on the vehicle title.
For a loan secured by a motor vehicle, you must make note of the security interest on the actual Title Certificate itself.
Each state will have a slightly different procedure for doing this.
In general, you first need to obtain the original Title Certificate.The owner of the vehicle, who is borrowing the money, should have the Title Certificate.
In some cases, if the owner already is paying on a first loan, and you are lending money as a second lien on the vehicle, then the first lienholder might have the Title Certificate.
The borrower would have to contact the first lender to get the Title Certificate. , On the back of the Title Certificate, you will find a section to report the details of your loan.
You will provide the date, amount of the loan, and signatures of both the borrower/owner and the lender., In most U.S. states, to finalize the procedure of securing the promissory note with a motor vehicle, you must deliver the original Title Certificate and the signed security agreement to the DMV.
The DMV will then create a new Title Certificate with the loan formally recorded on it.
Some states will charge a fee for this.Check with your state’s local procedures.
For example, in South Dakota, instead of the DMV, you will need to send the Title Certificate and security agreement to the county treasurer in the county where the vehicle owner resides.
There is a $10 fee.In Tennessee, for example, you will need to send the financing statement and Title Certificate to the local County Clerk’s office.
There is a fee of $11 for the lien notation and $5.50 for a state title fee.
There also may be a local county fee. -
Step 3: Complete the lien section on the Title Certificate.
-
Step 4: File the documents with the appropriate governmental office.
Detailed Guide
To “attach” collateral is a legal term that means you must identify the specific property that will be the collateral for the loan.
A motor vehicle is pretty easy to identify, by its Vehicle Identification Number (VIN) and by a brief description of the make and model.
As the lender, you will need to have your borrower sign a security agreement that contains this description and makes reference to the loan.A sample of a security agreement designed for a loan secured by a motor vehicle is available at http://www.ccclerk.org/SECURITY_AGREEMENT.pdf. (This particular sample is from the State of Ohio, but the general form is effective in any U.S. state.)
For a loan secured by a motor vehicle, you must make note of the security interest on the actual Title Certificate itself.
Each state will have a slightly different procedure for doing this.
In general, you first need to obtain the original Title Certificate.The owner of the vehicle, who is borrowing the money, should have the Title Certificate.
In some cases, if the owner already is paying on a first loan, and you are lending money as a second lien on the vehicle, then the first lienholder might have the Title Certificate.
The borrower would have to contact the first lender to get the Title Certificate. , On the back of the Title Certificate, you will find a section to report the details of your loan.
You will provide the date, amount of the loan, and signatures of both the borrower/owner and the lender., In most U.S. states, to finalize the procedure of securing the promissory note with a motor vehicle, you must deliver the original Title Certificate and the signed security agreement to the DMV.
The DMV will then create a new Title Certificate with the loan formally recorded on it.
Some states will charge a fee for this.Check with your state’s local procedures.
For example, in South Dakota, instead of the DMV, you will need to send the Title Certificate and security agreement to the county treasurer in the county where the vehicle owner resides.
There is a $10 fee.In Tennessee, for example, you will need to send the financing statement and Title Certificate to the local County Clerk’s office.
There is a fee of $11 for the lien notation and $5.50 for a state title fee.
There also may be a local county fee.
About the Author
Alexander Ruiz
Creates helpful guides on home improvement to inspire and educate readers.
Rate This Guide
How helpful was this guide? Click to rate: