How to Assign a Pennsylvania Promissory Note?
Promissory notes are typical in most financial transactions today. For instance, you’ve likely signed a promissory note if you've taken a bank loan. Banks use promissory notes to record the existence of loan agreements and define the obligations governing them.
Similarly, you may assign an all-inclusive promissory note when lending money to a relative or friend with whom you share cordial relations. An agreement means you can seek legal redress or obtain collateral if your debtor can't pay the loan.
Read on to understand how a Pennsylvania promissory note works.
What Is a Promissory Note?
A Pennsylvania promissory note is an agreement between a creditor and a debtor, documenting the existence of a loan transaction and how it will be paid back. Generally, the note has a promise statement and penalties may follow should the borrower pay late or fail to pay the loan.
Types of Promissory Notes
There are two types of promissory notes in Pennsylvania:
Secured Promissory Note
The borrower in a secured contract offers a security item for reimbursement if he can’t pay the loan. As a result, the creditor can legally take ownership of the security item (collateral).
Unsecured Promissory Note
unsecured promissory note doesn’t have collateral for the loan. The creditor bears the most significant liability for the loss because the debtor provides no guarantee of paying the loan. Unsecured promissory notes are suitable if the lender and borrower share a cordial relationship or the borrower has a good credit history.
How Much Interest Will You Pay In Pennsylvania?
Pennsylvania’s interest rate depends on the principal amount and whether the parties have a formal agreement in writing.
For loans not exceeding $50,000 and unsecured loans not exceeding $35,000, the maximum interest rate remains 6% per year. However, if the loan exceeds $50,000, the lender and borrower may write an agreed interest rate not surpassing the usury laws requirement.
How Can You Write a Promissory Note?
The first step to writing a consolidated promissory note is downloading a blank template applicable in Pennsylvania.
That aside, some items form part of the promissory note:
Write the date of assigning the note below the main title. Start with the month, day and year when writing the date.
Write the legal names of the lender and borrower, who may be individuals or corporate entities. If you have a cosigner, also include the legal names of the cosigner.
Write the mailing addresses of the lender and borrower, including the state, town, and code. If you’re assigning a secured agreement, include the physical address of the debtor for easy retrieval of collateral.
How much did the debtor receive from the lender? The principal amount is the loaned amount minus the accrued interest.
Write a mutually agreed interest rate, expressed per annum.
How will the debtor pay back the loan? If in installments, write the number of monthly installments and their respective amounts. You should also indicate the penalty for late payment if applicable.
Other Important Clauses
Besides the basic information, a Pennsylvania promissory note contains essential clauses defining the relevant obligations and agreements. They include:
- Accrued Interest if the borrower defaults.
- Payment allocation to interest and principal.
- Prepayment penalty.
- Payment of attorneys’ fees.
- Waiver of the creditor’s presence.
- Choice of governing law.
- Amendment of conflicting terms.
- Severability of clauses.
Do you wish to lend money to a friend? You can say goodbye to unpaid loans by assigning a conditional promissory note. Not only that, but you can make your work easier by avoiding the lengthy legal process. Simply download a free PDF form for Pennsylvania from our website to get started.