Alaska Promissory Note: What Is It?
An Alaska promissory note is a legally binding agreement between a lender who provides a loan to a borrower. Alaska promissory notes are regulated by Alaska Statutes Title 45, Trade and Commerce. Promissory notes may be secured or unsecured. A secured promissory note gives the lender the legal right to take collateral mentioned in the note to repay some or all of the debt owed. An unsecured promissory note does not include collateral. It is very important that if a promissory note is supposed to be secured that it is titled as secured and that it includes information about the collateral.
What Is the Maximum Amount of Interest That May Be Charged?
Under A.S. 45.45.010, the legal amount of interest that may be charged is 10.5% per year.
How to Write an Alaska Promissory Note
As mentioned earlier, if a promissory note is going to be secured, it should be titled as a secured promissory note. Regardless of whether the Alaska promissory note is secured or unsecured, it should include:
- The full date that the promissory note was created. This should be listed as month, day, and year.
- The legal name and mailing address of the borrower. If there is collateral because the note is secured, it is wise to also include the physical address of the borrower.
- The legal name and mailing address of the lender.
- The principal amount of the loan. This is important because not only does it document the amount borrowed, it also highlights the difference between the actual loan and the amount that is charged in interest. Make sure that this amount is checked to ensure that there are no typos.
- The annual percentage rate charged by the lender. For most promissory notes in Alaska, this amount can be no greater than 10.5%. Lenders who charge more than the legal amount of interest may be subject to legal action.
- How payments are made. Most promissory notes are paid in installments. These installments may be monthly, biweekly, or weekly. Additionally, the note should include information on the late fee that will be charged.
If it is a secured Alaska promissory note, it is important to title it as such. It is equally important to include information related to the collateral that is acting as security. Without these two items, the promissory note may not be considered secure if the borrower defaulted on the loan.
In addition to the basic information that identifies the parties and documents key information related to the loan, Alaska promissory notes must include the following specific clauses:
- Interest Due in the Event of Default. The purpose of this clause is to explain the amount of interest that will be charged if the borrower defaults on the loan. It is imperative to remember the maximum amount of interest that may be charged.
- Payment Allocation. This clause explains how payments made by the borrower are split between the interest due and the principal balance.
- Prepayment. The purpose of a prepayment clause is to explain whether paying the loan early will result in a penalty of some kind. Not all Alaska promissory notes include a prepayment penalty.
- Acceleration. An acceleration clause gives the lender the right to force the borrower to repay the remaining balance of the loan if they do not comply with the terms of the note.
- Attorney Fees and Costs. This clause explains who will pay for attorney fees and costs if a lawsuit arises. Sometimes, the parties pay their own expenses. If the lender sues the borrower for nonpayment and wins, some promissory notes state that the borrower will be responsible for the lender’s attorney fees and court costs if the lender’s lawsuit is successful.
- Waiver of Presentments. This clause explains that the borrower must pay what is due even if the lender is not present at the time of payment.
- Severability. This clause states that if any clause of part of the Alaska promissory note is unenforceable that the remainder of the document is still in effect.
- Conflicting Terms. This clause states that if there are conflicting terms within the promissory note that an amendment will be drafted to clarify and govern it.
- Notice. A notice clause includes information about how notice will take place if the lender attempts to obtain a judgment against the borrower. It may also include information about where the parties may send official notices related to the document.
- Governing Law. This clause explains which state will govern the agreement.
For a promissory note to be binding, it must be signed and dated by both the lender and the borrower in front of two witnesses. It is not required to have the note notarized, but the lender may find that helpful to prove the legality of the signatures.
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