Promissory Note Florida: What Does the Agreement Entail?

A casual lending agreement between friends and relatives may not require a formal arrangement since it depends on trust. However, lenders want to ensure that borrowers pay back as expected when transacting a large sum of money.

A promissory note agreement is a vital instrument that borrowers and lenders use to secure the transaction.

Read on to understand what a Florida promissory note entails.

What Is a Florida Promissory Note?

A Florida promissory note is a legally binding arrangement where the borrower promises to pay back a loan. The goal here is to establish a legal contract that the courts can enforce in the event of a dispute.

Florida Promissory Note: Secured Versus Unsecured

Like in other states, a basic promissory note in Florida can be either secured or unsecured, depending on mutual agreement.

A secured note has collateral such as intellectual property, automobile, or any personal property that belongs to the borrower. The collateral offers an alternative for the lender to recover the loan if the borrower refuses or cannot pay.

An unsecured note doesn’t have a security provision. Therefore, if the borrower defaults on the payment terms, the lender cannot claim rights to a property and will seek legal remedy.

How Much Interest Can Lenders Charge in Florida?

Chapter 687 of the Florida Statutes includes essential information on interest rates for promissory loans. According to the statutes, it is unlawful for lenders to charge an annual interest rate exceeding 18%. However, if the loan exceeds $500,000, lenders may charge up to 25% per year in interest.

What Are the Requirements for a General Florida Promissory Note?

A legally binding promissory note agreement in Florida must include the terms and highlight the rights and obligations of both parties.

Here’s what the contract entails:

Contact Information

The agreement includes the borrower and the lender's legal names and mailing addresses. Where the borrower enters a secured contract, it should consist of a physical address of the borrower's residence to facilitate the collection of collateral in case of a breach.

Creation Date

A valid Florida note must have the date below the title. The format for the date is the month, day, and year of creating an agreement.

A Promise of Payment

The lender should provide a formal statement promising to pay the principal amount to the official lender.

Loan Amount

The contract documents the borrower's principal amount from the lender without the interest.

Interest Rate

The lender should clearly define the interest rate as an annual percentage as a requirement. The maximum interest rate for loans exceeding $500,000 remains 25% p.a and 18% for loans amounting to $500,000 or less.

Repayment Options

The loan follows a structured payment based on the parties’ agreement. Most loans in Florida require monthly, weekly, or bi-weekly payments. Depending on the structure, it should define the number of installments and the amount to pay in each installment. Some lenders also charge a penalty for late payments.

Maturity Date

A basic Florida promissory note includes a date by which the lender should complete the principal amount payment.

Consequences for Non-payment

A crucial aspect of the business promissory note describes the consequences of nonpayment. The borrower agrees to bear the consequences of not paying the loan as required.

Notices

A notice section highlights how the borrower would wish to receive notifications from the lender. For instance, if the lender sues the borrower for default, the borrower may opt to receive by email or mailing address.

Signing

A Florida promissory note includes the borrower's signature and the date of signing the contract.

Do you wish to lend money to a friend or relative? Download a simple promissory note template or blank promissory note example for Florida here.