An unsecured promissory note is used for loans that include no collateral. A promissory note can be advantageous when an entity is unable to find a loan from a traditional lender, such as a bank. The legal interest rate is 6% but parties may agree to a maximum of 8% in a written agreement. With a contract in place, the maximum interest rate is 12%. If you're a business owner, you may be asked to sign a promissory note when receiving funding for your business. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. What makes a promissory note invalid? Business and agricultural loans have a maximum of 12 percent or five percent greater than the 90-day discount rate of commercial paper. While promissory notes generally dont need notarization to be enforceable in court, it is often recommended in order to avoid any question over the authenticity of the document. 15% or 6% above the rate published by the Federal Reserve System, whichever is greater. As a legally binding document, borrowers must abide by the terms they agree to when they sign. For written contracts, the maximum 16% on loans below $3,000, 5% per month on loans between $3,000 and $250,000, and no limit on loans above $250,000. What makes a promissory note invalid? Free Promissory Note - Create, Download, and Print - LawDepot However, if a lender asks that the document be notarized, this will provide an additional degree of assurance that the borrower will make payments by the specified date. Promissory Notes - Complaints - Default State: Multi-State Control #: US-01126BG Instant Download Buy now Available formats: Word | Rich Text Review package This form is part of a package. To help minimize these risks, an investor must register the note or have it notarized so that the obligation is publicly recorded and legal. Because it is governed and regulated by individual states, the. Any changes to the original incur a signed, amended version which otherwise may create a breach of contract. "Financing the Farm." Also known as a note payable, it is a legally binding document that outlines the terms and conditions of the loan and holds the borrower accountable for repaying the borrowed amount. Promissory Notes have much in common with loan agreements, but the former only binds the borrower and is more informal.They function similarly to IOU notes, detailing information about what one person owes another..