What is a negotiable financial instrument that serves as evidence of a debt?

A promissory note is a negotiable financial instrument that explicitly outlines a borrower's promise to repay a specified amount of money to a lender under agreed-upon terms. It is essentially a written, legally enforceable document that serves as proof of debt, detailing the principal amount, interest rate, payment schedule, and other relevant conditions.

This instrument is transferable, meaning it can be endorsed to another party, allowing the lender to sell or assign the note if necessary. The characteristics of a promissory note—its ability to be negotiated, its formal recognition of a debt, and the clarity it provides regarding repayment—make it an essential instrument in financing transactions.

In contrast, a loan agreement provides broader terms and conditions surrounding the loan but may not necessarily be negotiable like a promissory note. A debt security generally refers to an investment, such as bonds, giving holders the right to receive repayments, but it is not primarily framed as a promise to pay directly between private parties in the same manner. A mortgage contract primarily relates to securing a loan with property but does not inherently represent a direct promise to repay in the same negotiable sense.