A South Dakota unsecured promissory note establishes a legal framework for a loan arrangement where a borrower agrees to repay a lender a specified sum of money without offering collateral as a security measure. This type of agreement inherently carries more risk for the lender, as the absence of collateral means there isn’t a direct means to recover the loan amount if the borrower defaults.
Lenders typically enter into these loan agreements with individuals they know well and trust, such as close friends or family members, so they can increase their likelihood of timely repayment. If the lender doesn’t know the borrower well, they may still issue an unsecured loan if the borrower has a good credit history.
