What does a promissory note establish for borrowers?

A promissory note is a legal document that represents a borrower's promise to repay a specific loan amount to the lender under agreed-upon terms. By signing this note, the borrower acknowledges their responsibility for the debt, thereby establishing a legal obligation to repay the loan as specified in the document. This includes details such as the principal amount borrowed, the interest rate, the repayment schedule, and the consequences of default.

The significance of the promissory note lies in its role as a binding contract that protects the lender's rights and clarifies the borrower's commitments. It serves not only as evidence of the loan but also enforces the borrower's duty to adhere to the repayment terms laid out.

While the other aspects mentioned in the other options can be part of a mortgage agreement or additional documentation, they are not the primary function of a promissory note. It does not establish a lender's obligation to issue a loan or cover modifications or interest rate adjustments, which are typically addressed in separate loan agreements or addendums.