Free Promissory Note Template for Personal Loan to Family Member

Updated March 03, 2022

A promissory note, or promise to pay, is a loan contract betwixt a lender that agrees to lend money to a borrower to be repaid with involvement.

The notation holds the borrower accountable for paying back the coin under the agreed-upon terms. If the borrower fails to repay the loan, they will be in default and subject field to seizure of their assets.

Usury Charge per unit Laws – The maximum interest rate (%)immune in a Country.

Past State

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New United mexican states
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• Southward Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• Washington D.C.
• West Virginia
• Wisconsin
• Wyoming

Past Type (2)

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Secured Promissory Note – For the borrowing of coin with an asset of value "securing" the amount loaned such equally a vehicle or a domicile. If the borrower does non pay back the amount within the fourth dimension frame suggested the lender will take the right to obtain the property of the borrower.

Download: Adobe PDF, MS Word (.docx), OpenDocument

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Unsecured Promissory Note – Does not let the lender to secure an asset for coin loaned. This ways that if the payment is non made by the borrower that the lender would have to either file in small claims courtroom or through other legal processes.

Download: Adobe PDF, MS Word (.docx), OpenDocument

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Table of Contents

Promissory Notes: Past State Promissory Notes: By Type (2) Secured Unsecured What is a Promissory Notation? (Video) How to Create a Promissory Note (5 steps) Pace 1 – Concur to Terms Step 2 – Run a Credit Report Step 3 – Security and Co-Signers Footstep 4 – Writing the Note Step five – Paying Back the Money How to Summate (3 means) Full Interest Owed Total Repayment Amount Monthly Payment Amount Usury Laws (Interest Rates %) Fundamental Terms & Clauses How to Write Related Forms

What is a Promissory Note?

A promissory notation is a hope to pay dorsum money owed within a specific timeframe. The borrower receives the funds after the note is signed and agrees to make payments nether the terms and conditions of the note. The lender volition collect involvement which acts as a fee for lending the money.

(Video)

How to Create a Promissory Note (5 steps)

• Step 1 – Agree to Terms
• Stride 2 – Run a Credit Report
• Step iii – Security and Co-Signers
• Stride four – Writing the Note
• Stride 5 – Paying Back the Money

Step 1 – Concord to Terms

Before both parties sit downwardly to write an agreement, the post-obit should be verbally agreed upon:

• Amount ($) – The amount of money beingness borrowed.
• Interest Rate – In other words, the fee for borrowing the money (Run across How to Calculate). Make sure to check the Interest Rate Laws in your State (or "Usury Rate"). All States have a maximum amount of interest a lender is able to charge.
• Belatedly Fee(due south) – In the case there will exist penalties for late payment.
• Security – Items such as vehicles or a second mortgage on a habitation is provided if the borrowed money is not paid back by the borrower. This is to provide balls to the lender that their coin will be paid-back either in cash or assets.
• Terms of Repayment – Will the payments be made incrementally or as a lump sum?
• Default Clause – Provide terms in the take a chance the coin is never paid back by the borrower.
• Co-Signer – If the borrower is not financially capable of borrowing the money a 2nd person should be named to pay back the loan if the borrower cannot do then themselves.

Stride two – Run a Credit Report

It is ever a good idea to run a credit report on any potential borrower as they may have outstanding debt unbeknownst to you. Specially if the debt is IRS or child support related information technology will take precedence over this promissory note. Therefore, it is imperative that a credit written report is run before making any type of agreement.

Reporting Agencies – It is a expert thought to use Experian which is complimentary to the lender and charges $fourteen.95 to the borrower. Experian is known as the well-nigh sensitive credit agency ordinarily providing the lowest score of the three Credit Bureaus (Experian, Equifax, and TransUnion).

Authorization Grade – In order to run someone else'due south credit, you must obtain written legal permission.

Step 3 – Security and Co-Signer(s)

If at that place are ruddy flags that announced on the credit written report the lender may want to have the borrower add Security or a Co-Signer to the note. Common types of security include motor vehicles, real estate (provided as a 1st or second mortgage), or whatsoever type of valuable nugget.

This would hateful that in the upshot the borrower did non pay back the funds that the lender would be able to obtain full ownership of the security placed in the note. In the instance of a co-signer, he or she would be liable for the full extent of the money owed along with all penalties or late fees.

Footstep iv – Writing the Note

After the main terms of the notation have been agreed upon the lender and borrower should come together to authorize the formal agreement. For instructions on how to fill in the document, line-by-line refer to the How to Write section.

Signing – The money should exchange easily subsequently it has been signed. It is not required that a witness sign the grade but is recommended. For excessive amounts (more than than $10,000) a notary public is recommended.

Stride v – Paying Back the Money

The borrower should pay back the borrowed money on time and in accord with the note. If non, fees may be applied to the overall balance. In one case all the coin has been fully paid back to the lender a Loan Release Course is created and issued to the borrower relieving them from whatever liability from the note.

• If Payment is Late – If the payment is late the lender should effect a Demand Letter of the alphabet. This is a form that informs the borrower of the terms stated in the promissory annotation such as the penalty for late payment as well as how much time they accept earlier they get in default.
• If Borrowed Money is Never Paid –  If the borrower defaults on the note so the lender can collect by minimizing their costs by seeking the funds through Modest Claims Court (Small Claims is ordinarily limited to a value of $10,000 or less, exist sure to cheque the laws in your jurisdiction). If there was security placed in the notation then the belongings or asset shall exist turned over to the borrower in accordance with the note. Otherwise, legal activeness will nigh probable be necessary for money owed in value of more than $10,000.

How to Calculate (3 ways)

• 1.Total Interest Owed
• 2. Total Repayment Amount
• 3. Monthly Payment Amount

ane. Total Interest Owed

Money Borrowed X Annual Involvement Rate = Full Interest Owed

If the payment is monthly or quarterly, then split the total above past the fraction of the yr it will take to repay the loan. Instance: Payment due in iii months would require y'all to divide the total by iv since it's only 1/4 of the year.

• Instance – Let'due south say I wanted to borrow $1,000 for 3 months at an involvement rate of 10%. Outset, I would want to calculate the involvement rate over a year span which would be $100 ($ane,000 times ten%). Then, I would divide the $100 amount by four (as in that location are 4, 3-month periods in a twelvemonth) and I would arrive at $25  as the total involvement owed I would demand to pay over the grade of 3 months for borrowing $1,000. The final payment amount would be $1,025 .

ii. Full Repayment Amount

Money Borrowed + Total Involvement Owed = Terminal Payment Amount

• Case – Let's say I wanted to borrow $1,000 for 3 months at an involvement rate of 10%. First I would want to summate the involvement rate over a year span which would be $100 ($i,000 times 10%). Then, I would divide the $100 corporeality past iv (equally there are 4, 3-month periods in a twelvemonth) and I would arrive at $25 equally the total interest owed I would need to pay over the course of three months for borrowing $1,000. The final payment amount would be $i,025 .

three. Monthly Payment Corporeality

(Money Borrowed + Total Involvement Owed) / Number (#) of Months = Monthly Payment Amount

• Example – Let's say I wanted to infringe $ane,000 for 3 months at an interest rate of 10%. First I would want to calculate the involvement rate over a year span which would be $100 ($ane,000 times 10%). Then I would divide the $100 amount by 4 (every bit in that location are 4, 3-month periods in a year) and I would arrive at $25 as the total interest owed. Then we would add the Money Borrowed of $ane,000 to the $25 of involvement due which equals $ane,025. Since there are 3 months we would divide $1,025 by 3 and the monthly payment corporeality would equal $341.67.

Usury Laws (Interest Rates %)

Also known equally the maximum charge per unit of interest a lender can charge. It's important that Lenders practise not charge a rate of interest more than what their state allows. The post-obit are links to each state'due south Usury Rate Laws.

Country	Usury Charge per unit	Laws
Alabama	8% for written contracts, half-dozen% for verbal agreements.	Ala. Lawmaking § eight-8-one
Alaska	For loans less than $25,000, five% above the 12th Federal Reserve District interest rate on the mean solar day the loan was made, or 10%, whichever is greater. If the amount is more than $25,000, there is no maximum rate.	Alaska Stat. § 45.45.010
Arizona	No limit for loan agreements in writing. If non in writing, the rate shall be x% per annum.	Ariz. Rev. Stat. Ann. § 44-1201
Arkansas	Charge per unit of involvement may non exceed the maximum of 17% every bit established in the Arkansas Constitution, Amendment 89.	Ark. Code Ann. § iv-57-104
California	Rate may not exceed 10% per yr on loans for personal, family unit, or household purposes. For other loans for other purposes, the maximum is the higher of 10% or 5% over the amount charged past Fed. Res. Depository financial institution of San Francisco at the fourth dimension loan was fabricated.	Cal. Const. Article XV, § 1
Colorado	For supervised loans general usury limit is 45%, and the maximum for unsupervised loans is 12%.	Colo. Rev. Stat § v-12-103 and § 5-2-201
Connecticut	The interest charge per unit may not exceed 12%.	Conn. Gen. Stat. § 37-4
Delaware	Not in excess of 5% over the Federal Reserve discount rate at the time the loan was fabricated.	Del. Lawmaking. Ann. tit. 6, § 2301
Florida	General usury limit is 18%, 25% on loans over $500,000.	Fla. Stat. § 687.03 and § 687.01
Georgia	The default is 7% if no written contract is established. For written contracts, the maximum 16% on loans below $three,000, five% per calendar month on loans between $iii,000 and $250,000, and no limit on loans above $250,000.	Ga. Code Ann. § 7-4-2 and § 7-4-xviii
Hawaii	The default is 10% if no written contract is established, 12% is the general usury limit, and 10%  is the limit on judgments.	Haw. Rev. Stat § 478-2, § 478-3, and § 478-4
Idaho	Unless stipulated in a written understanding, the legal rate is 12%. The rate of involvement on money due on court judgments is v%.	Idaho Lawmaking Ann. § 28-22-104
Illinois	The general usury limit is 9%.	815 Ill. Comp. Stat 205/4
Indiana	viii% in the absence of agreement, 25% for consumer loans other than supervised loans.	Ind. Code § 24-4.6-one-102 and § 24-iv.5-3-201
Iowa	The maximum interest rate is 5% unless otherwise agreed upon in writing, in which case, maximum is set past Iowa Superintendent of Banking (IA Usury Rates).	Iowa Code § 535.2(3)(a)
Kansas	The legal charge per unit of interest is 10%; the general usury limit is xv%.	Kan. Stat. Ann. § 16-201 and  §xvi-207
Kentucky	The legal rate of interest is eight%, the full general usury limit is four% greater than the Federal Reserve charge per unit or 19%, whichever is less. Any charge per unit may exist charged when identified in a contract in writing on a loan greater than $15,000.	Ky. Rev. Stat. Ann. § 360.010
Louisiana	The general usury rate is 12%.	La. Rev. Stat. Ann. § nine:3500
Maine	The legal interest charge per unit is vi% (no usury limit mentioned in statutes).	Maine Rev. Stat., titl. 9-B, § 432
Maryland	The legal interest rate is 6%, a maximum of viii% if a written contract is established.	Dr.. Code Ann., Com. Law § 12-102 – 103
Massachusetts	The legal interest rate is vi% (unless a written contract exists); fifty-fifty if part of a contract, an interest charge per unit over 20% is criminally usurious.	Mass. Gen. Police force Ch. 107, § 3 and Ch. 271, § 49
Michigan	7% maximum if a written contract is established. Otherwise, the legal charge per unit is 5%.	Mich. Comp. Laws § 438.31
Minnesota	The legal charge per unit of interest is 6%. For written contracts, the usury limit is 8%, unless for an amount over $100,000, in which case there is no limit.	Minn. Stat. § 334.01
Mississippi	The legal rate of interest is 8%. Parties may contract for a rate of upwardly to 10% or 5% in a higher place the Federal Reserve disbelieve rate, whichever is greater.	Miss. Code Ann. § 75-17-one
Missouri	The maximum interest rate is ten%, unless the market charge per unit is greater at the time.	Mo. Rev. Stat. § 408.030
Montana	15% or 6% above the rate published by the Federal Reserve Arrangement, whichever is greater.	Mont. Code Ann. § 31-1-107
Nebraska	The maximum interest charge per unit is 16%.	Bill. Rev. Stat. § 45-101.03
Nevada	Parties may contract for a rate upward to the bottom of 36% or the maximum charge per unit permitted nether the federal Military Lending Act.	Nev. Rev. Stat. § 99.050
New Hampshire	There is no legal limit on interest rates. It is unclear whether an exorbitant charge per unit could be considered "unfair" nether the New Hampshire Consumer Protection Act and hence unlawful.	North.H. Rev. Stat. Ann. § 336:one, § 358-A:2
New Jersey	half dozen% without a written contract, 16% maximum if a written contract is established.	N.J. Stat. Ann. § 31:one-1
New Mexico	fifteen% maximum in the absenteeism of a written contract.	N.G. Stat. Ann. § 56-8-3
New York	The legal rate of involvement is 6%, the general usury limit is 11.25%	Northward.Y. Gen. Oblig. § 5-501 and N.Y. Cyberbanking § 14-A
North Carolina	For loans less for less than $25,000, the maximum is the amount announced on the 15th of each calendar month by the N Carolina Commissioner of Banks. For loans greater than $25,000, the parties may agree in writing to any corporeality.	N.C. Gen. Stat. § 24-1.i
North Dakota	For written contracts for loans less than $35,000, the maximum rate is five.5% above the current maturity charge per unit of Treasury Bills for the half-dozen months preceding the issuing of the loan, or 7%, whichever is greater.	N.D. Cent. Code § 47-fourteen-09
Ohio	The maximum interest for written contracts for loans of amounts less than $100,000 is 8%.	Ohio Rev. Lawmaking Ann. § 1343.01
Oklahoma	The parties may agree in a written contract to whatever rate so long as it does not violate other applicable laws.	Okla. Stat. tit. 15, §266
Oregon	The legal interest rate is 9%, but the parties may agree to different rates in a written understanding. Business and agricultural loans have a maximum of 12 percent or v percentage greater than the ninety-twenty-four hour period discount rate of commercial paper.	Or. Rev. Stat. § 82.010
Pennsylvania	For loans less than $50,000, the maximum rate is 6%.	41 Pa. Cons. Stat. Ann. § 201
Rhode Island	The maximum interest rate is the greater of 21%, or the domestic prime rate as published in the Wall Street Journal plus 9%.	R.I. Gen. Police force § 6-26-ii
South Carolina	Unsupervised lenders may not charge a rate above 12%. No lender may accuse a charge per unit in a higher place eighteen%.	S.C. Code Ann. § 37-3-201
South Dakota	No limit if a written agreement is established, 12% if no agreement exists.	South.D. Codified Laws § 54-3-4 and § 54-iii-16(iii)
Tennessee	The maximum charge per unit is ten% unless otherwise expressed in a written contract.	Tenn. Lawmaking Ann. § 47-fourteen-103
Texas	The parties may agree in writing to a maximum charge per unit up to the weekly ceiling equally published in the Texas Credit Letter. If no agreement exists, then the maximum is 10%.	Tex. Fin. Code Ann. § 302.001(b), §303.002
Utah	The maximum rate of interest is 10% unless the parties agree to a different rate in a written contract.	Utah Code Ann. § 15-1-1
Vermont	The rate of interest is 12% except in certain circumstances as provided in subsection (b) of § 41a.	Vt. Stat. Ann. tit. 9, § 41a
Virginia	The legal rate of involvement is 6%. With a contract in place, the maximum interest rate is 12%.	Va. Lawmaking Ann. § half dozen.2-301 and § six.two-303
Washington	The maximum rate of involvement is 12% or 4% points above the average bill rate for 26-week treasury bills in the month before the loan was made.	Wash. Rev. Lawmaking § 19.52.020
Washington D.C.	The maximum rate of interest is 24% for written contracts and six% for verbal contracts.	D.C. Lawmaking, Title 29, Chapter 33
Westward Virginia	The legal interest rate is half-dozen% just parties may agree to a maximum of 8% in a written understanding.	W. Va. Lawmaking § 47-6-five
Wisconsin	The legal rate of interest is 5%. Parties may agree to a dissimilar rate in a written agreement, subject to limitations that depend on the identity of the lender.	Wis. Stat. § 138.04
Wyoming	The rate of interest is vii% if no understanding is established in a written contract. Otherwise, parties may hold to a higher charge per unit.	Wyo. Stat. Ann. § 40-14-106

Cardinal Terms & Clauses

• Resource allotment of Payments
• Acceleration
• Chaser's Fees and Costs
• Alien Terms
• Co-Signer
• Execution
• Integration
• Not-Waiver
• Notice
• Pre-Payment
• Severability
• Waiver of Presentments

Resource allotment of Payments – Describes how payments shall exist made in regards to belatedly fees, interest, and the principle. In our free promissory note, payments shall get-go pay off any late fees and interest before the principle is credited.

Acceleration – In the event a borrower defaults on the note or on a provision within the note and does not cure the default within the allotted time frame, the lender has the selection to demand immediate payment of all outstanding ante from the borrower.

Attorney'due south Fees and Costs – The borrower must pay all monies incurred if defaulting on the loan results in the involvement of attorneys and court proceedings. Nonetheless, if the borrower ends up prevailing in court, no matter the issue, the lender must then pay for all court-related costs.

Conflicting Terms – That no other agreement shall have superior legality or control over the promissory note.

Co-Signer – Or "guarantor", is a person that guarantees a loan if the borrower defaults. Typically if the lender suspects a borrower to be risky, the lender may require the borrower to obtain another credible person to co-sign on the note.

Execution – States that the borrower is the Principal within the note and severally liable for all dues. If at that place is a co-signer, both the borrower and the co-signer are equally responsible for paying dorsum the loan.

Integration – States that no other document can touch on the terms or validity of your promissory note. Simply tin your promissory annotation be amended (edited) if both the lender and borrower sign a written agreement.

Non-Waiver – If for any reason the lender fails or delays to do their rights under the terms of the notation, it does non signify or deem that they are waiving their rights. For instance The lender delays in responding to the borrower almost an upcoming payment due. The non-response past the lender does non give the borrower the right to not make payment on the due date.

Detect – Describes how notices should be delivered to the borrower. Information technology is standard do for notices to be written and to be delivered either in person or by certified mail service with copies and receipts.

Pre-Payment – A clause detailing the rules of paying off the loan early, whether it's the entire loan or individual payments. Some loans may require that the borrower pay a fee in order to "prepay" the loan.

Severability – A clause within a promissory note which states that if any provision within the note becomes void or unenforceable, it does not deem the entire note or any other provision within the note invalid.

Waiver of Presentments – This is a short clause that implies that the lender does not have to demand payment when payments or the loan is due, the borrower holds the responsibility to brand certain that the payments are paid when due. If the borrower does non pay when due, the lender must event a discover of non-payment. Further, if the borrower refuses to pay the note, the lender shall have the notice of non-payment presented and notarized which may follow with legal proceedings.

How to Write

Download: Adobe PDF, MS Give-and-take, OpenDocument

Step 1 –

Related Forms (two)

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I Owe You (IOU) – A receipt acknowledging a debt that is owed with no timetable for payment.

Download: Adobe PDF

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Loan Release Form – When the annotation has been paid-in-full, the lender should set the borrower free of all liabilities by authorizing a release form.

Download: Adobe PDF, MS Word (.docx), OpenDocument

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