Legal Definitions - serial note

A serial note, also commonly referred to as an installment note, is a legal document that outlines a promise to repay a debt through a series of regular, scheduled payments over a specified period. Instead of the entire principal amount being due at once at the end of the loan term, the principal, along with any accrued interest, is gradually paid down through these periodic installments. Each payment typically includes a portion of the principal balance and the interest due for that period, systematically reducing the outstanding debt over time.

• Example 1: Home Mortgage

  When a family purchases a house, they typically take out a mortgage loan from a bank. The mortgage agreement requires them to make a fixed payment of $1,800 every month for 30 years.

  Explanation: This mortgage is a serial note because the family is repaying the large principal amount of the home loan through a series of consistent, scheduled monthly payments over an extended period (30 years). Each $1,800 payment contributes to both the interest and the principal balance, gradually reducing the total debt until the house is fully owned.

• Example 2: Personal Loan for Home Renovation

  A homeowner takes out a personal loan of $20,000 to remodel their kitchen. The loan agreement stipulates that they must make monthly payments of $450 for five years.

  Explanation: This personal loan is a serial note because the borrower is obligated to repay the $20,000 debt through a predetermined series of monthly installments over a five-year term. Each $450 payment systematically reduces the principal amount owed on the renovation loan, along with the interest.

• Example 3: Business Equipment Financing

  A construction company needs a new bulldozer and finances its purchase through a specialized equipment lender. The financing agreement requires the company to make quarterly payments of $15,000 for four years.

  Explanation: This equipment financing arrangement is a serial note. The construction company is repaying the cost of the bulldozer through a series of regular, scheduled quarterly payments over a four-year period. Each $15,000 payment helps to pay down the principal amount of the loan and any accrued interest, rather than requiring the company to pay the full amount upfront or in one large sum at the end.