A deed of trust is similar to a security agreement or a mortgage on a home or other real property. This document legally defines the conditions of the loan and the agreement between the trustor (borrower), trustee (holds the legal title), and the beneficiary (the lender). If the borrower defaults on the loan, this document gives the trustee the right to sell the property and pay the lender with the proceeds.
What is a Promissory Note?
A promissory note is a legal document that puts the loan in writing and describes the amount and due date. It can also spell out interest payments and give the lender the right to reclaim any collateral such as goods or property, or seek other remedies if the borrower fails to pay the loan amount. When the lender and borrower sign a legal form, it makes the arrangement official. Promissory notes provide evidence of the debt if you end up going to court.