Promissory Note Mississippi: When Do You Need It?
You’ll often hear about promissory note when taking a bank loan. That’s normal because banks use the document as a handy tool to help you understand your legal obligations towards the loan.
Besides securing a bank loan, a contingent promissory note helps safeguard personal loans, real estate deals, investment schemes and car or student loans.
Read on for more about Mississippi promissory note and their applications.
What Is a Promissory Note?
A promissory note is a written document promising monetary payment for a loan, with parties including the lender and borrower, although a co-signer may also be present.The purpose is to put the agreement in writing for future reference should a dispute arise.
In Mississippi, a promissory note contract is legal, enforceable and subject to Contracts and Securities laws.
Types of Promissory Note
Like other states, promissory note in Mississippi can be either secured or unsecured.
A secured loan protects the lender by providing an asset for security. If the borrower can’t pay the loan, the borrower can retrieve the asset to recover the loan.
An example of a secured note is a car loan where the vehicle is the collateral. If you fail to pay the loan, the lender will take the car to clear the outstanding balance.
On the other hand, an unsecured note is similar to a secured contract, except for security. It doesn’t have collateral, which increases the lender's risk. If you default on the loan balance, the lender can’t recover the loan unless through a small claims court.
What Is the Legal Lending Rate in Mississippi?
The Mississippi Code, Section 75-17-1, outlines the legal rates for promissory note. According to the statutes, lenders should not charge more than 10% per year or 5% above the Federal Reserve discounted rates. Without a written contract, the maximum interest rates are further reduced to 8% per year.
When Do You Need a Promissory Note in Mississippi?
Promissory note have wide-ranging applications in financial transactions. For instance, if you want to secure your lending and have guaranteed payment, you should assign a note to your debtor.
Here are common uses of promissory contracts:
A promissory note contract is a handy tool when lending money to a colleague, friend, or relative. The agreement guarantees that you won’t lose what you lend to your friends and colleagues.
Commercial loan consumers are among the frequent users of promissory note. Banks, credit unions, and loan agencies usually require debtors to fill out the document before getting a loan. Usually, promissory contracts for commercial lending have accompanying collateral, which lenders may take if the borrower fails to pay the loan.
Buying Real Estate
When buying a home through mortgage financing, your financier may issue a promissory note for the housing loan. The house becomes collateral and the lender can take control if the borrower doesn’t meet the mortgage obligations.
Buying a Car
You can write a promissory note to buy a car if you don’t have substantial cash to pay upfront. You can promise to pay the lender alongside the vehicle as collateral in the contract. Typically, the note may require a uniform monthly installment and a lump-sum payment to clear the loan at the end of the period.
Taking a Study Loan
Financiers of students’ loans sometimes require lenders to fill out a promissory note to guarantee loan repayment. Although they are legally binding, such contracts have flexible terms such as deferred interest until you clear your studies. Some also allow up to six months of grace period after graduating.
Promissory note are essential instruments of credit transactions. With increasing technological advances, you no longer need to book an appointment with an attorney. If you wish to fill out a promissory contract in Mississippi, download a free PDF contract copy from this website today!