Demand Note: Everything You Need to Know

There are many different kinds of loans available to choose from that match your financial preference. This is arrived at after assessing your preferred repayment terms and specific needs. Therefore, it’s evident that nowadays, you have access to a broad range of loans. One of the loans that you should consider taking to boost your financial standing is demand notes.


If you’re not familiarized with such financial terminology, you might be wondering what exactly a demand note is, right? Worry not, as in this post, you’re going to be taken through every helpful detail about demand notes you need to know.

What Are Demand Notes?

Demand notes refer to loans that don’t have a repayment schedule or fixed terms. This makes these loans to be relatively informal, hence why they’re often seen among friends, family, or close business acquaintances. Nonetheless, banks also can issue demand notes, albeit this is only done to long-standing clients with excellent credit profiles.

Before requesting a demand note, you must consider how they’re deployed regardless of your current needs.

What is the difference between a demand note and a promissory note?

While both the promissory notes and demand notes are written agreements from the lender to the borrower, they have distinguishing differences. The promissory note refers to a financial instrument with a written promise made by one party to a different party for a specific sum of money. This sum is payable either on a specified date or on-demand. The promissory note also contains terms relating to the obligation, including;

  • Principal amount
  • Maturity date
  • Interest rate
  • Place and date of issuance
  • Issuer’s signature

In contrast, the demand note is a loan made to person in need of financial assistance but doesn’t contain the legal consequences and formalities. The person getting this loan doesn’t get subjected to the principal and interest repayment schedule. In addition, there’s no set maturity date. However, the borrower is expected to be ready to repay the loan upon request by the lender. With that said, the lender is expected to give reasonable notice when demanding payment.

Demand Note Template (PDF Form)

Demand Note Template (PDF Form)

Is demand note a security?

The United States Supreme Court in 1990 deemed that all demand notes are also considered to be a security. But notes considered as securities are only those issued by the farmers’ coop trying to raise capital. However, other notes aren’t considered to be securities, and these include notes that;

  • Evidence a “character” loan to the bank client
  • Provided in consumer financing
  • Secured by a lien on the small business
  • Guaranteed by a home mortgage
  • Indemnified by the assignment of accounts receivable

Are demand notes current liabilities?

Current liabilities refer to a debt obligation that’s expected to be paid back within one year. Demand notes fall under this category as the creditor may demand payment in less than one year after being granted the loan.

What is a demand note payable?

This term means that you’re required to pay back the debt right after the creditor had made the request. It’s not a must for the phrase “payable on demand” to be written on this document. Instead, it’s assumed that any note doesn’t have a particular payment period to be payable on demand.

This term payable on demand is, in many cases, usually linked to promissory notes.

How do you write a demand note?

When writing the demand note, there are a couple of useful guidelines to follow, including;

  • Be polite: To ensure you resolve your dispute harmoniously, it’s best not to use a harsh tone. Otherwise, the other party might see you’re attacking them personally and respond with the same tone. This slows how soon you two get to resolve the matter.
  • Set a deadline: Mention a date by when the other party should have responded to this letter.
  • Type your letter: It’s ideal for typing this letter using a computer rather than being handwritten. If you don’t have a personal computer, either go to a local public library or borrow a friend.
  • Be short and concise: Go straight to the point on the facts about your debt.
  • Make and have copies: Get several copies before sending out this letter.
  • Ask for precisely what you want: Be straightforward on the exact amount of money you want instead of beating around the bush.


Demand notes are becoming more and more popular as people opt to take out loans from friends and family during these tough economic times caused by COVID-19. If you had no idea what demand notes are, this post has stated every useful detail you need to know.