Investing with promissory notes is a universal method of diversifying portfolios and creating and accepting investment options. These financial instruments also represent a decent return for investors interested in the associated level of risk and can allow anyone to operate as a lender.
What Are Promissory Notes?
A promissory note is a type of financial instrument. It carries a written promise by the maker or issuer to pay a set sum to a second party, known as the payee. The terms of payment can be at a set time in the future or on the demand of the payee.
The promissory note will also often include such applicable terms as interest rate, principal, date of maturity, place and date of issuance and the signature of the maker or issuer. Promissory notes for investment can be represented by mortgage notes, deeds of trust, trust deeds and additional interest-bearing notes.
Investing With Promissory Notes
In terms of promissory note investment, these instruments represent debt available to organizations and enterprises for fundraising. They consist of money loaned by investors. For their contribution, investors have the promise of income at intervals. The case for investing is based on the promise of high rates of return and low levels of risk.
The Purpose of Investing in Promissory Notes
Although promissory notes can be issued by organizations and financial institutions, they can also represent a source of financing from places other than banks, including companies and individuals.
Through this route, anyone can become a lender and essentially perform the same function as a bank would for a loan or mortgage. The purpose of investment is money lending with the interest of growth according to equity or interest and the terms of agreement.
Mountain West IRA Inc offers a range of small business and individual retirement plans that include the option to purchase promissory notes for self-directed IRAs.