Promissory Note Michigan: Is It Necessary?
Most financial transactions require the use of a standard promissory note. Businesses, for instance, use promissory note to obtain financing for high-value industrial equipments. Banking clients also use promissory letters to secure loans for individual projects.
Assigning a promissory note means having a standalone document that defines legal obligations when handling financial transactions.
If you've been skeptical about promissory note, here are reasons to reconsider your stand. Plus, we'll help you understand what signing a promising note in Michigan involves.
Promissory Note Michigan: A Brief Overview
A promissory note is an official note drafted to formalize a financial transaction. Unlike other contracts, the note is often between a lender and borrower, with a promise to pay a loan as agreed. A promissory contract also involves the borrower's co-signer in some other cases
Like other states, a Michigan promissory note is a legal, financial instrument subject to the Contract Laws.
Depending on your transaction, you may have the following options to choose from:
Secured Promissory Note
A secured Michigan promissory note incorporates a security item like a car, real estate from the debtor. If the debtor can't clear the loan, the lender can retrieve the asset for loan recovery.
Secured contracts are mostly applicable where the parties do not have a close relationship, or the transaction involves a significant sum of money.
A secured borrower promissory note bears the title "Secured Promissory Note." Failure to label the contract may render it unsecured before the court.
Unsecured Promissory Note
You won't include security if you opt to sign an unsecured promissory document. Thus, if you default on the loan balance, the lending institution can only seek redress in court. Moreover, the lender may ask a credit bureau to review your credit rating.
What Interest Will You Pay in Michigan?
Chapter 438 of The Michigan Compiled Laws contains laws governing monetary and interest rates in Michigan. Under the law, lenders can charge a maximum rate of 7% per year for agreements presented in writing. Similarly, non-written contracts can attract a maximum rate of 5% per year.
The laws in Section 438.41 further make lenders liable for a criminal offense if they charge interest rates exceeding 25% per year.
Benefits of Michigan Promissory Note
The advantages of an all-inclusive promissory note generally outweigh the downsides. By signing a promissory note, you'll reap the following benefits:
Clarity on Loan Terms
A promissory agreement helps parties avoid conflict by listing clear terms of the loan. You'll find essential clauses in the contract, such as payment information, maturity date, installment schedules, mailing addresses and legal names.
The contract also provides detailed information about collateral, so the lender will retrieve it easily when needed. Having clear terms on the document means both parties understand their rights and obligations in executing the contract.
Evidence to Pursue Justice
A promissory note is proof of a financial transaction in many ways. First, it contains the date of creating the agreement. In case of a dispute, the courts can refer to that date when making critical judgments. Secondly, the contract contains the signatures of all parties and notary agents, which add authenticity when deliberating in court.
A promissory note in Michigan allows flexibility. Borrowers and lenders can agree on flexible payment plans, such as lump sums or installments. Moreover, parties can determine the frequency of payment and the amount of each installment. Eventually, debtors will have a convenient payment mode that suits their unique needs.
Are you looking for a free Michigan promissory note? You can conveniently find a free template without visiting an attorney and you can do this by downloading a free printable template from our site today!