finance
negotiable instrument
A negotiable instrument is a written, signed promise or order to pay a specific sum of money, payable on demand or at a set time, that can be transferred to another party by endorsement or delivery. A promissory note used in a mortgage loan is a common example. Its transferability allows lenders to sell notes in the secondary mortgage market. Checks are also negotiable instruments.
- Exam tip
- The promissory note is the negotiable instrument and the evidence of the debt; the mortgage or deed of trust is the security instrument. Exams test this distinction.
- Example
- A lender originates a $250,000 promissory note and later sells it to an investor by endorsing it, transferring the right to receive payments.
Related terms & state variants
Sources
Source verification pending. Confirm current requirements with your state regulator.
Last verified: 2026-10-23