A Louisiana unsecured promissory note outlines the conditions by which one party (the borrower) is obligated to repay an uncollateralized loan to another (the lender). Without collateral backing the note, the lender has no immediate means of recovering the debt if the borrower defaults on payment. Instead, they can hire a debt collector to demand compensation or, if non-payment continues, file a lawsuit against the borrower to seek wage garnishments or another form of income seizure.
Compared to a secured promissory note, an unsecured note presents a significant risk to the lender, as they will have no assets or property to seize if payment stops. Lenders can minimize their risk by only extending unsecured loans to individuals they trust or those with a strong credit history.
Secured Promissory Note – Establishes a payment arrangement where the borrower offers their property or assets as collateral.