A note is a written I Owe You (IOU) document that spells out the agreement between a borrower and a lender. By signing the document, both parties are legally bound by the terms and conditions in the document.
These IOUs come in one of two forms:
- Secured: if the borrower fails to repay a debt, then the lender has the right to seize a collateral (such as a house).
- Unsecured: no collateral is attached to the loan.