Louisiana Promissory Note: What Are the Payment Options?
If you lend money to a friend or colleague, you hope to get it back. But what if they don’t honor their promise? The surest thing you can do is to cut ties with your colleague for betraying your trust. Besides cutting links with your friend, you need a way to recover the money.
A conditional promissory note can cushion you against such bad debtors and give you a platform to claim the loan. The contract also helps you hold the debtor accountable by enforcing legal obligations.
Find more information about Louisiana promissory note.
What Is a Louisiana Promissory Note?
A promissory note in Louisiana is a formal contract between a lender and debtor, documenting the amount of money borrowed and how to clear the balance. The contract may also include a co-signer who helps the debtor to receive the loan. The purpose is to help the financier get reimbursement for the borrowed amount within a desirable timeline.
Louisiana is one of the states that accept the formulation and execution of promissory note. Under Article 3 of the Louisiana UCC, a conditional promissory note is a legal document enforceable due to breach.
Before assigning a promissory note, both parties usually agree on the primary content, including the payment schedule, interest rates and late payment fines. Once signed, the document becomes valid and holds both parties accountable for their obligations.
Types of Promissory Note
A promissory note contract exists in two primary forms
Secured Promissory Note
The contract applies when the borrower accepts to give up a valuable property as collateral. If the borrower defaults on the agreement, the lender has the right to take the property for loan recovery.
Unsecured Promissory Note
The contract applies when the borrower doesn’t include any item for security. The lender faces a higher risk of losing the money if the debtor fails to pay the loan. Therefore, lenders should enter an unsecured contract if the borrower has a good credit history or shares a personal relationship.
Provision for Interest Rates in Louisiana
Section 9:3500 of the Louisiana Revised Statutes regulates promissory contract interest rates. Under the law, the maximum interest rate should be 12% p.a. for all contracts. The law further requires borrowers to include the terms of interest in the form when taking a loan.
Louisiana Promissory Note: Payback Options
A promissory contract has different payback options:
Paying in Installments
An installment option allows you to settle the loan in bunches over the payment period. For example, you can pay $5,000 every month for a year. Other options will enable a bigger payment at the end of the payment schedule. For instance, in a loan of $5,000, you can pay $500 for six months and deliver the final $2,000 at the end.
Some lenders require a lump sum payment where you deposit the entire amount at an agreed date. Others may also impose an “on-demand” system where you’ll pay the whole amount following the lender’s request.
Essential Elements of a Promissory Note
A Louisiana promissory contract contains critical information outlining the scope of the agreement between parties.
The following vital aspects form part of the contract:
The date of creating the contract appears below the main title, following a specific format. When writing the date, begin with the month, day and year.
Legal Identity of the Parties
The form uses the legal names and mailing addresses to identify the parties involved. Therefore, a Louisiana promissory contract includes the borrower, lender, and co-signers (where applicable).
The contract includes the principal amount in US Dollars.
The form contains an annual percentage rate the debtor will pay in interest. In Louisiana, the maximum rate remains at 12% per year.
The lender includes a payment schedule detailing the due date, installments and late payment penalties.
Are you ready to assign a promissory note? You don’t need to visit an attorney’s office in Louisiana. Begin your journey by downloading a free printable note from our website.