What Are the Payment Options for a Vermont Promissory Note?

You may reach out to a friend or close family member for quick cash at one point in life. Alternatively, your friend may borrow money from you to settle some pressing needs. Either way, the lender would want the borrower to reimburse the loan faithfully, thus necessitating a promissory note.

When signing a promissory note, how do you determine the payment terms? Should you pay in a lump sum or monthly installments?

Read on to understand the different payment options for a Vermont promissory note.

But First: What Is a Vermont Promissory Note?

A promissory contract in Vermont is a written document recognizing the existence of a transaction between a debtor and a creditor.

The promissory letter highlights the borrower’s promise to pay the principal and accrued interest. Moreover, it outlines a deadline for the borrower to complete all payments, failure of which the lender may take legal action.

Types of Promissory Notes

Vermont, like other states, recognizes two forms of promissory letters. Under the Vermont Statutes, parties can sign a secured or unsecured promissory agreement.

Vermont Secured Promissory Note

A secured contract has financial protection guaranteeing the loan repayment. The borrower provides an item to back the promissory statement to pay the loan. If the borrower defaults or willfully admits inability to complete the loan payment, the item automatically goes to the lender for recovery of the funds.

Vermont Unsecured Promissory Note

Parties to a contract can sometimes sign an unsecured promissory note. The agreement doesn’t include any item as collateral except the borrower’s written promise to pay. In an unsecured promissory note, the lender will likely lose the loaned amount if the borrower fails to reimburse.

What’s the Legal Interest Rate in Vermont?

Vermont’s usury rates are subject to Title 9, Section 41a of the statutes. Other than a few exceptions, the interest rates cannot exceed 12% per annum for all promissory note agreements. Lenders who violate the usury codes may be liable to criminal charges by the state.

Payment Options for Promissory Notes in Vermont

There are different payment plans for Vermont promissory contracts. Whenever you sign a contract, you may agree with the lender on the most convenient payment option for your case. In Vermont, you may opt for any of the following plans:

Paying in Installments

Installment plans are the most common, owing to their flexibility. Under the plan, your creditor may require a fixed upfront payment (deposit) to cut on accruing interest. Afterward, you’ll pay equal monthly installments over the loan repayment period.

Installment plans are flexible since you can customize your balance into gradual payments according to your earnings. They are mostly suitable when buying expensive equipment such as cars.

Lump-sum Payment

A lump-sum payment is also known as “Due on a Specific Date." The lender will specify a date to reimburse the loan without monthly installments. Thus, you'll pay the whole amount (principal and interest) to the creditor. The plan works best if you borrow a small amount.

Due on Demand

Some financiers allow open-ended transactions where you pay the loan upon request. They are ideal when taking small loans, mostly between friends and family.

Installment with a Balloon Payment

Sometimes, you may opt to pay equal installments rolled over a specific period and a final lump sum (balloon payment) to clear the balance. The plan is ideal if you are cash starved but have some money to kick-start the payment process. An example of an installment with a balloon payment is a mortgage plan.

Do you need a convenient payment plan for your promissory note? You can pay in installments if you are cash-starved. Before then, we have a free promissory note for download to save you the rush for a legal appointment in Vermont.