How to Fill Out a Promissory Note in Illinois
When a friend asks you for a soft loan, you may give willingly, hoping they’ll repay. But what if something happens and your debtor breaks the promise?
Signing a promissory note cushion you against disappointments in loan transactions. By signing a promissory note, you hold the debtor accountable for the loan and have proof that you can use to institute legal action.Here’s what you should know about a Promissory note in Illinois.
What Is a Promissory Note?
As the name suggests, a promissory note is a written promise to pay a loan. Unlike verbal agreements, a promissory note is a formal contract signed under the law and enforceable in court. Usually, the contract involves a borrower and the lender and contains the loan agreement terms.
The State's Interest Act and the Uniform Commercial Code guide promissory notes' creation, execution, and enforcement in Illinois.
Types of Promissory Notes
Before signing a borrower promissory note, you should determine the most suitable type. It all depends on the type of loan you owe your lending institution.
Generally, they are of two types:
A secured note guarantees the lender a refund through collateral. For a secured loan, the borrower should provide sufficient information about the item listed as collateral.
An unsecured note doesn’t have collateral for the loan. Therefore, the lender doesn’t have the right to the lender’s property in case of default. Instead, the lender can explore alternatives like going to a small claims court to recover the money.
What Is the Maximum Interest Rate in Illinois?
The Illinois usury law contains legal criteria for interest rates in promissory notes. Chapter 815 of the Illinois Compiled Statutes (ILCS) states that lenders cannot charge interest rates exceeding 9% for promissory notes. Therefore, any lender who breaches the prescribed regulation is liable for legal action.
How Do You Fill Out an Illinois Note?
Writing an all-inclusive promissory note can be tricky for first-timers, but the process becomes easy when you have a template.
The first step is downloading a suitable template and writing an appropriate title for your note.
Once you have an appropriate title, you can fill out the details as follows:
Indicate the Date
Write the date of creating the agreement beneath the title. A promissory note follows a specific format for the date, starting with the month, day, and year.
Indicate the Principal Amount
An Illinois promissory note contains the borrower's principal amount from the lending institution. The principal doesn’t include interest, as it appears in its section within the document. Before you execute the contract, make sure the figure is correct.
Identify the Parties
A valid note reveals the names and mailing addresses of the borrower and the lender. The borrower’s physical location is also critical for secured notes as it may help the lender retrieve the collateral when required.
Indicate the Interest Rate
Before signing a promissory loan agreement, you should agree on the appropriate interest rate with the lender. Once agreed, you can indicate the rate in the relevant section. The rate should be within the maximum limit that the state recommends.
Write the Payment Schedule
The payment schedule includes the date for paying the loan, the installment schedule and how many installments you'll pay to complete the loan.
Indicate the Maturity Date
The maturity date is the appropriate time for the borrower to complete the entire loan, including the principal amount and accrued interest.
Sign the Contract
An Illinois promissory requires the signature of the lender and borrower to remain valid. After signing, the parties should indicate the date they signed the contract. In Illinois, a promissory note does not need a notary or witness.
The good thing with a promissory note today is that you don’t have to contact an attorney to get the template. You can simply visit our website and download a free editable promissory note online anytime for your real estate transaction, vehicle purchase or for rental payment.