What makes an IOU enforceable
A promissory note is a written promise to pay a specific amount of money. To hold up, it needs the essentials: the full legal names of the lender and borrower, the principal amount in numerals and words, the date the money was handed over, the interest rate (or a statement that there is none), when and how repayment is due, what happens on default, the governing state, and signatures. An IOU that says only "I owe Mike $2,000" acknowledges a debt but leaves out the terms, which is why courts treat a proper note much more seriously than a scrap of paper.
The generator writes the amount in words automatically (Two thousand and 00/100 Dollars) so a stray digit cannot change the meaning, and lets you choose between a single due date and monthly installments. For a no-interest installment loan it also calculates how many payments it takes and the date of the last one; with interest, payments apply to interest first, then principal, and the tool estimates the number of payments.
Interest, usury limits and late fees
Charging no interest is common between family members and is perfectly legal, although the IRS may treat a large interest-free loan as a gift or impute interest above the annual gift exclusion. If you do charge interest, every state caps what a private lender may charge; California's constitution limits most non-bank personal loans to 10% per year, New York's civil usury limit is 16%, and many states allow 8 to 12% unless the parties agree in writing to more. The tool flags rates above 10% so you can check your state's rule; a note that exceeds the limit may have its interest voided entirely.
Simple interest keeps the math transparent: $2,000 at 5% for one year is $100. A late fee should be modest and tied to a grace period (a $25 fee after 10 days is typical), and a default clause should give the borrower written notice and a short window to cure before the whole balance comes due. Leave out anything you would not actually enforce.
Signing, notarizing and when to get a lawyer
Both parties should sign and date the note and keep a copy; a photo of the signed page is fine. Notarization is not required for a promissory note to be valid in any state, but it makes a signature very hard to dispute later, and it costs a few dollars at a bank, shipping store or online notary, so it is worth doing for larger amounts. A witness signature is an alternative if a notary is inconvenient. Pay the loan by check, Zelle or bank transfer rather than cash so there is a record that the money changed hands, and have the lender write a receipt for each repayment.
For loans above a few thousand dollars, loans secured by a car or property, loans to a business, or anything involving a co-signer, spend an hour with an attorney. Secured loans need a separate security agreement and often a lien filing, and business loans raise tax and lending-license questions this simple template does not address. Nothing here is legal advice.