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The Interest Only Promissory Note is a crucial financial instrument in South African commercial and private lending practices, typically used when a borrower requires financing with reduced payment obligations during the loan term. This document type is particularly valuable when the borrower anticipates significant future income or asset liquidation events but needs immediate access to capital with manageable periodic payments. The note must comply with South African financial regulations, including the National Credit Act and the Prescribed Rate of Interest Act, making it suitable for both institutional and private lending arrangements. It includes detailed provisions for interest calculations, payment schedules, default scenarios, and enforcement mechanisms, while potentially incorporating security arrangements and guarantees where required.

1. Parties: Identifies and provides full details of the Lender and Borrower

2. Background: Brief context of the loan arrangement and purpose

3. Definitions: Defines key terms used throughout the document

4. Principal Amount: States the amount being borrowed and currency

5. Interest Rate: Specifies the interest rate, calculation method, and compliance with usury laws

6. Payment Terms: Details of interest-only payments including frequency, due dates, and payment method

7. Term and Maturity: Duration of the note and conditions for final principal repayment

8. Default Events: Defines what constitutes default and consequences

9. Remedies: Legal remedies available to the lender in case of default

10. Representations and Warranties: Standard declarations by the borrower about their capacity and authority

11. Notices: How formal communications between parties should be made

12. Governing Law: Confirms South African law governs the agreement

13. Signature: Execution clause and signature blocks