Which instrument evidences a borrower's personal obligation to repay a loan?

Which instrument evidences a borrower's personal obligation to repay a loan?

• A. Mortgage
• B. Deed of Trust
• C. Promissory Note
• D. Security Agreement

Answer: (C)

The promissory note is the instrument that shows the borrower's personal promise to repay the loan under defined terms. It states the amount borrowed, the interest rate, payment schedule, and due date, creating personal liability—meaning the borrower is legally obligated to repay the debt even if the property is damaged or sold. The mortgage or deed of trust, on the other hand, is the security instrument that places a lien on real property to secure that debt. It doesn’t itself promise repayment; it gives the lender a security interest and the right to foreclose if the note isn’t paid. A security agreement serves a similar role for personal property collateral, but it doesn’t establish the personal obligation to repay—that obligation comes from the promissory note.

The promissory note is the instrument that shows the borrower's personal promise to repay the loan under defined terms. It states the amount borrowed, the interest rate, payment schedule, and due date, creating personal liability—meaning the borrower is legally obligated to repay the debt even if the property is damaged or sold.

The mortgage or deed of trust, on the other hand, is the security instrument that places a lien on real property to secure that debt. It doesn’t itself promise repayment; it gives the lender a security interest and the right to foreclose if the note isn’t paid. A security agreement serves a similar role for personal property collateral, but it doesn’t establish the personal obligation to repay—that obligation comes from the promissory note.