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A note is simply a promise to pay or an IOU. A note can be used on anything. Car loans are notes, credit cards are notes, the napkin that says 'IOU $20 for lunch' are all examples of notes. Mortgages, Home Equity Loans, Home Equity Lines of Credit (HELOC) are all types of notes that are backed or secured by collateral and are therefore less risky than unsecured notes.

What is a Note?

Types of Notes

Secured vs Unsecured

  • Secured debt is a loan that has been guaranteed by some sort of collateral. A car loan is secured by the car. If the terms of the car loan are not satisfied, the car can be repossessed. Similarly, a mortgage is secured by the property. If the terms of the mortgage aren't met, the property can be foreclosed upon.

  • Unsecured debt has no security or collateralized asset to back it up. It's simply given on the word of the person that they will repay the debt. It is considered riskier than secured debt because there is no way to recoup the investment if the borrower doesn't fulfil the terms of the contract.


PN vs NPL vs SPN vs RPL

  • A performing loan is a loan that is collecting payments per the loan agreement.

  • A non-performing loan is a loan that is not collecting payments per the agreement.

  • A sub-performing loan is a loan that is performing, but not per the loan agreement. This could mean always being late, not paying for a couple months and then catching up on payments, or paying every 6 months when the contract says monthly.

  • A re-performing loan is a loan that was sub or non-performing but that has reinstated the loan and is now performing per the loan agreement or modification.



  • A partial loan purchase is an agreement between the loan owner and a 3rd party. The owner of the loan agrees to sell a set number of payments on the loan to the 3rd party. The 3rd party is purchasing a partial and essentially owns the loan for the terms of the partial agreement. This is advantageous because the original loan owner is still invested in the success of the loan and making sure it performs to the loan agreement. The 3rd party investor is getting a very passive investment, secured by real estate, that provides monthly cash flow and a healthy return.


Judicial vs Non-judicial

  • A judicial state is a state where a mortgage that is being foreclosed on will need to go in front of a judge to plead their case.

  • In a non-judicial state, a foreclosure action is largely administrative, which can decrease the cost and amount of time it takes to foreclose.


Deed vs Lien

  • A deed is the ownership document for a property.

  • A lien is secured against a property and is the right to collect debt owed or foreclose on the property to satisfy the debt. A mortgage is a type of lien.

In terms of tax deed versus tax lien states, a tax deed state gives the deed to the property to the winner of a tax foreclosure auction. Tax lien states give a lien against to the property to the winner of a foreclosure auction.

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