what's the difference between a loan agreement and a promissory note
Promissory note Promissory notes differ from IOUs in that they contain a specific promise to pay along with the steps and timeline for repayment as well as consequences if repayment fails.[15] IOUs only acknowledge that a debt exists.[16][17] In common speech, other terms, such as "loan", "loan agreement", and "loan contract" may be used interchangeably with "promissory note" but a loan agreement or contract will typically be more detailed than a promissory note.[18]
Off-balance-sheet Traditionally, banks lend to borrowers under tight lending standards, keep loans on their balance sheets and retain credit riskâ€”the risk that borrowers will default (be unable to repay interest and principal as specified in the loan contract). In contrast, securitization enables banks to remove loans from balance sheets and transfer the credit risk associated with those loans. Therefore, two types of items are of interest: on-balance sheet and off-balance sheet. The former is represented by traditional loans, since banks indicate loans on the asset side of their balance sheets. However, securitized loans are represented off the balance sheet, because securitization involves selling the loans to a third party (the loan originator and the borrower being the first two parties). Banks disclose details of securitized assets only in notes to their financial statements. [1]