Loan Note

What is a 'Loan Note'

A loan note is an extended form of an IOU from one party to another that enables a payee to receive payments (possibly with interest) over a set period of time, ending with the date at which the entire loan is to be repaid.

Loan notes are usually provided in lieu of cash at the payee's request.

BREAKING DOWN 'Loan Note'

A loan note can help an individual investor avoid an undue tax hit resulting from a lump sum payment from a settlement or cash-out package from a company. In these cases, the individual is given a choice between cash or a loan note.

When loan notes are used between businesses, the purchaser is able to act as a borrower and make payments over time, often at a minimal or "at cost" interest rate.

RELATED TERMS
  1. Loss Payee

    The party to whom the claim from a loss is to be paid. Loss payee ...
  2. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  3. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  4. Cumulative Interest

    The sum of all interest payments made on a loan over a certain ...
  5. Promissory Note

    A financial instrument that contains a written promise by one ...
  6. Stretch Loan

    A loan that is extended to another party, either an individual ...
Related Articles
  1. Retirement

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  2. Credit & Loans

    Student Loans: Private Loans

    While federal loans should always be your first borrowing choice, they may not cover your full tuition – never mind lab fees, books, and room and board. That's where private loans come ...
  3. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  4. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  5. Credit & Loans

    How To Combine Two Mortgages Into One?

    If you have a second mortgage as well as a primary, does it make sense to consolidate into a single loan? Here's how to figure it out.
  6. Retirement

    Student Loan Debt: Is Consolidation The Answer?

    Consolidating your student loans offers convenience, but there are drawbacks.
  7. Credit & Loans

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  8. Entrepreneurship

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  9. Credit & Loans

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  10. Credit & Loans

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
RELATED FAQS
  1. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  2. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  3. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  4. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
  5. Are debt-consolidation loans tax deductible?

    Learn about consolidating debt and whether the interest payments on your debt consolidation loan can be deducted from your ... Read Answer >>
  6. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center