How to Write a Maine Promissory Note
Every formal contract comes with legal obligations and promissory note are no exception. For this reason, whenever you take a loan, the lending institution or individual expects you to pay back the money without fail. Signing a promissory note helps lenders create a legal framework for mitigating losses from bad debts.
Here's what a promissory note in Maine entails.
Promissory Note Maine: An Overview
A promissory note is a formal promise by a lender to pay a loan according to the agreed terms. Usually, the contract binds the lender and the borrower, although a co-signer may also append a signature.
Maine, like other states, allows parties to assign a promissory note under the state regulations. Thus, an official promissory note is a legally enforceable contract subject to securities and contract regulations.
Promissory contracts may take two forms:
Secured Promissory Note
The borrower includes an asset as collateral for the loan in a secured note. Parties may agree beforehand on the item to retain as collateral. If the debtor can't pay the loan, the lending institution has the right to take the property to recover it.
Unsecured Promissory Note
An unsecured note doesn't include security for the loan. Unsecured promissory note carry a high-risk burden for the lender in case of defaulted terms. As a result, lenders can only seek legal redress in court to recover their money.
What Is the Legal Interest Rate in Maine?
Under Title 9B, Section 432 of the Revised Statutes, the maximum interest rate for promissory note is 6% p.a. Parties may agree on a different rate in writing if it doesn't exceed the state's recommendation. If a lender charges beyond the legal rate, the state or the borrower may institute legal action.
How to Write a Promissory Note in Maine
The first step to write a promissory agreement is determining whether it is secured or unsecured. If you opt for a secured note, it should bear an appropriate title as "Secured Promissory Note". Without the title, the court may treat the agreement as unsecured in case of a legal dispute.
In addition to the title, the contract should have the following items:
The date clarifies when the parties entered the agreement and help the parties determine a time frame for the payment.
Names and Mailing Address
The contract contains the lender and the borrower's legal names and mailing addresses. In addition, the debtor may include a physical address to facilitate easy retrieval of the collateral.
The contract should indicate the debtor's loan amount from the lender, excluding interest.
Parties should define an appropriate interest rate for the loan. In Maine, the maximum interest should be 6% per year.
Most Maine agreements usually follow an installment payment plan; weekly, bi-weekly and monthly.
The promissory contract highlights how much interest the debtor will pay in case of defaulted agreement.
A promissory contract should have a formal plan for allocating loan payments to principal and interest. For instance, the principal may take 60%, while interest accounts for 40% of the loan repayment.
The clause allows the lender to demand full loan repayment if the borrower fails to honor the agreement.
Parties to the contract may agree on how to share the legal costs. In some instances, if the debtor defaults on payment, the lender may want the debtor to pay all attorneys' fees for dispute resolution.
Choice of Law
An official promissory note defines the state laws regulating and enforcing the contract.
A promissory note highlights how to resolve conflicting terms in the agreement. Usually, the best approach is to amend any contradictory terms in the document.
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