Writing a Promissory Note in Arizona
Sometimes, you may offer a helping hand to your friends and relatives through financial support. Although you may expect them to pay back, they may forget or fail to pay. Without a proper explanation, you may have a strained relationship with your debtor.
Creating Promissory notes help you overcome such inconveniences by defining your payment terms beforehand. You can agree with a debtor on how you’ll receive the payment and penalties for default.
Here we highlight an overview of promissory notes and how to write a promissory note in Arizona.
An Overview of Arizona Promissory Notes
A general promissory note is a written document containing a promise by the borrower to pay a sum of money on an agreed date.
The parties to a basic promissory note include the lender and the borrower, who may be individuals or entities such as a corporation. Besides a promise to pay, the promissory note may have penalties for nonpayment.
In Arizona, a generic promissory note is a legally binding contract under the usury and contract laws. Depending on the nature of the financial transactions, a promissory note may also be subject to securities law.
Types of Standard Promissory Agreements
Promissory notes in Arizona are of two types:
Standard Secured Promissory Notes
Here, you promise to pay off the loan balance and include property as collateral when you enter a secured promissory note. As a result, you’ll relinquish the property to the lender to recover the loan if you fail to pay. Collateral may include real estate, jewelry, vehicles, or other valuable possessions.
A general secured note should clearly define the title as "secured" to remain effective.
Standard Unsecured Promissory Notes
An unsecured promissory note requires no collateral. In case of failed payment, the lender can only use legal means to recover the funds borrowed.
Unsecured agreements carry significant risk, thus suitable only if you know the other signatory well. Typically, you can enter an unsecured agreement with your close friends and family members.
Arizona Promissory Note: Usury Laws
Section 44-1201 of the Arizona Statutes highlights the laws that regulate promissory notes. Under regulations, the interest rate should not exceed 10% per year and remains unchanged throughout the contract period.
On the other hand, a promissory note depends on mutual agreement and may sometimes not include any interest. It all depends on your relations with the lender.
How Can You Write an Arizona Promissory Note?
In Arizona, you can fill out an official form or customize a special promissory note based on state recommendations as given on our website.
The first step is to title your agreement as “Secured Arizona Promissory Note” or “Unsecured Arizona Promissory Note.”
Afterward, you can follow an official sequence as follows:
Determine the Loan Amount and Include the Date
Write the amount of funds borrowed in US dollars and include the date of signing the agreement. When writing the date, list out the month, day, and year of the contract.
Identify the Parties to the Agreement
An official promissory agreement in Arizona includes your name and mailing address. You should also have your physical location to help the lender retrieve the collateral when necessary for a secured agreement. In addition, the general promissory note should contain the lender's identity, including the state, city, and zip code.
Determine the Principal Amount
Determine the principal amount, clearly defining the loan amount and the accrued interest for the whole year.
Append Your Signature
The agreement includes your signature and the date of signing the contract on the last page. Before signing, you should read through the document and ensure you gratify all conditions prescribed in the law.
Notarize Your Agreement
The Arizona statutes require parties to notarize their promissory letters. The process involves signing the document in the presence of a notary who will affirm the decision by stamping the state seal and signature.
Download a free blank promissory note template for personal loan or for repayment of loan here.