The Critical Elements of a Promissory Note in Idaho
Promissory notes are financial instruments that help lenders and borrowers secure their dealings. By creating this formal agreement, a lender can have peace of mind knowing the debtor will refund the money.
Different states have regulations governing the creation, use and enforcement of promissory notes in USA. Therefore, it is essential to understand what the state law says about a promissory note before signing it. So, here are the details of the Idaho promissory note.
An Overview of Idaho Promissory Note
An Idaho note is an official agreement between a borrower and the lender, promising to pay a sum of money at an agreed date. The agreement, which is usually written, outlines a loan amount and how the borrower will settle the loan.
Types of Promissory Notes in Idaho
Like in other states, Idaho has provision for two forms of promissory notes, including the following.
Secured Promissory Notes
A secured note grants the lender the right to take a specific property designated as collateral for the loan. The collateral helps the lender recover the loan if the borrower fails to repay it as agreed.
Before signing the agreement, both parties usually agree on the most suitable item to include as collateral. Common collateral items include vehicles, intellectual property and aesthetic items.
Unsecured Promissory Notes
An unsecured note comes with a promise to pay the loan but doesn’t guarantee collateral for the lender. Without collateral, the lender risks losing the loan amount if the borrower can’t repay as expected. Owing to the high level of risk, people are advised to only enter unsecured agreements with individuals they can trust or know personally.
What’s the Interest Rate for Idaho Promissory Notes?
The Idaho Code, Section 28-22-104, highlights the rates of interest for promissory notes. According to the statutes, the maximum interest rate for personal loans is 12% per annum. If the lender charges above the state’s recommended rate, the borrower may sue the lender for legal action.
However, the maximum interest rate for monetary judgment is 5% (the judgement rate) and is subject to annual changes by the State Treasurer’s Office.
What Does Idaho Promissory Note Include?
A promissory note in Idaho should contain essential identification of the parties involved and the loan terms.
Basic elements include:
The date of creating the agreement appears below the title, formatted as the month, day and year.
The borrower's legal name and mailing address form part of the contract. If the borrower enters a secured agreement, a physical address also comes in handy if the lender needs to collect the collateral.
A promissory note should include the lending institution’s legal name and mailing address.
The contract specifies the loan amount that the borrower received from the lender. However, the principal amount doesn’t include the interest payment.
The lender should indicate the interest rate for the loan. As already mentioned, the maximum interest rate for Idaho is 12% per year. If you wish to determine the interest rates for monetary judgments, consult the State’s Treasury Office.
A promissory note in Idaho is not complete without information about the payment frequency. In Idaho, lenders prefer monthly installments from their clients. The clause also specifies the number of installments and the amount of each installment. If the lender has a penalty for late payment, it should appear.
In addition to the basic elements, an Idaho note contains essential clauses that include pertinent information.
Below are essential clauses to consider:
- Interest due on default
- Payment allocation
- Attorneys’ fees
- Presentments waiver
- Conflicting terms
- Governing law