Understanding Kentucky Promissory Note

Lending money to a friend or relative can be a good gesture. However, if your kind gesture leads to disagreements from unpaid debts, you should give it a second thought. Therefore, creating a promissory note is a good way to create boundaries and avoid financial drain.

An all-inclusive promissory note defines legal obligations, shielding you against bad debtors. The contract also gives you the right to take legal measures if your debtor refuses to pay the loan.

Here, we’ll help you understand how to get an editable promissory note in Kentucky.

Kentucky Promissory Note in Brief

A promissory agreement is a formal contract between a lender and borrower, promising to pay the loan under the agreed terms.

A lending promissory note contains essential aspects such as interest rates, payment schedule, maturity date, principal amount, and many more.

In Kentucky, a general promissory note is not merely an agreement but a legal contract enforceable under Kentucky Statutes. Thus, if either party breaches the terms, legal implications may follow.

Types of Promissory Notes

In Kentucky, residents can choose between a secured and unsecured promissory note.

A secured note has a guarantee for payment in the form of collateral. Here, the borrower gives the lender the right to take a valuable property in case of nonpayment. Common items used as collateral include cars, apartments, precious jewelry, stock, watercraft, and intellectual property.

An unsecured loan has no provisions guaranteeing payment if the borrower defaults on the loan terms. For this reason, the lender may opt to seek justice in a court of law.

Kentucky Promissory Note: Interest Rates

The state regulates interest rates for promissory contracts under section 360.010 of the Revised Statutes. Although parties may agree on a written mutual rate, the maximum interest rate in Kentucky remains 8% per year.

Some exceptions, however, may still apply when setting interest rates. For instance, if the loan amount exceeds $15,000, parties may agree on a different interest rate and put it in writing.

When Do You Need a Promissory Note?

A promissory note is ideal if you lend a sum of money, expecting reimbursement of the full amount and accrued interest. Also, a promissory agreement will be suitable if you borrow money from a friend who'll feel upset about nonpayment.

Typically, promissory contracts apply in:

• • Student loans
  • Commercial loans
  • Car loans
  • Personal lending

What to Include in a Kentucky Promissory Note?

Like promissory contracts in other states, a Kentucky agreement bears a title explaining the type of agreement. If secured, the word “secured” should appear in the title.

A Kentucky note also contains the following critical elements:

Date of Creation

The date acts as a reference in case of disputes and determines how long the interest will accrue if the borrower defaults on payment. When writing the date, follow a specific format beginning with the month, day and year.

The Parties’ Details

The contract bears the legal names of all parties involved in the agreement, including the borrower, lender and cosigners. Moreover, the mailing addresses of all parties should also be in the form.

Principal Amount

If you borrow money from a bank, your Kentucky promissory note should state the amount you borrowed, exclusive of the accrued interest. Review the amount to ensure the figure indicated is accurate and exact.

Interest Rate

A promissory agreement should state an interest rate as agreed by both parties. The maximum interest rate shouldn’t exceed 8% in Kentucky unless otherwise agreed in writing.

Payment Information

Most promissory notes in Kentucky allow debtors to pay in installments. The breakdown includes the number of installments and any penalty for late payment.

Did you know that you can get a free promissory note sample online? You don't have to see an attorney to get your template. All you have to do is check our website to download your copy, and you will be good to go.