Make a Alaska Promissory Note

What Is the Maximum Amount of Interest That May Be Charged?

Under A.S. 45.45.010, a landlord may legally charge up to 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 date that the promissory note was created. List this as the month, day, and year.
• Borrower’s legal name and mailing address. If there is collateral because the note is secured, it is wise to include the borrower’s physical address.
• 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 of interest. Check this amount 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 to make payments. Most promissory notes are paid in installments. These installments may be monthly, biweekly, or weekly. Additionally, the note should include information on any applicable late fee.

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 defaults 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 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 the borrower’s payments are split between the interest due and the principal balance.
• Prepayment. The purpose of a prepayment clause is to specify if paying the loan back 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 part of the Alaska promissory note is unenforceable, 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 occur 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’s law will govern the agreement.

For a promissory note to be binding, both the lender and the borrower must sign and date the note 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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A Sample Alaska Promissory Note with Examples for Each Step

An Alaska promissory note can be unsecured or secured. A secured promissory note must be titled as such; it must also be further identified with specific language and requires a detailed description of the security interest (the property that will serve as the collateral).

A secured promissory note should include the following sections:

• Security and Priority: In this section, the borrower and lender (payee) agree that all obligations under the note will be secured by the collateral defined in the security agreement entered into between the borrower and lender.  This section contains a general description of the collateral explicitly defined in the security agreement.
• A secured promissory note is generally accompanied by a security agreement that allows the lender to seize the collateral (specific property) if the borrower defaults. The security interest in the particular property should be outlined in a UCC financing statement. When the financing statement is filed with the appropriate government agency, the lender's interest in the specific property is deemed "perfected," giving the lender top priority over future lenders seeking a security interest in the same piece of property.

Both unsecured and secured promissory notes in Alaska should include the following sections:

• Definition of Terms: This section contains a list of terms and their meanings used in the loan agreement  ("As used in this Agreement, the following terms shall have the meanings set forth below").
• Payments: These are provisions relating to the terms for repayment of the amount due, including principal and interest, overdue amounts, default/nonpayment rate, manner of payment, and extension. This section should specifically note the date the promissory note was devised, the name and mailing address of the borrower and lender, the amount of money loaned to the borrower, the amount/annual percentage rate of interest to be charged (as allowed by applicable Alaska state law governing maximum annual interest/usury rates for written contracts), how repayment will be made (installments, interest-only, lump sum, or, in the case of a secured promissory note, a balloon payment), the number, amount, and due date of each payment, any late fee to be charged for late payment, and where/how payment is to be made.
• Allocation of Payments: This section describes how much of each payment will be applied to the interest/principal.
• Guaranty/Co-Signer (optional): In this section, a third party (the guarantor) agrees to be directly or collaterally responsible for the obligation of the borrower to the lender in the event of default (the borrower fails to pay).
• Representations & Warranties: Representations and warranties supply facts and protection in the event of default, respectively, if the statements made are not true.
• Covenants: A covenant in a loan agreement requires the borrower to fulfill certain conditions, such as punctual payment of principal, or prevents the borrower from taking certain actions.
• Defaults/Interest Due upon Default: This section defines the events that constitute a default and the interest due upon default (as allowed by applicable Alaska state law).
• Acceleration: This section requires the borrower to repay the remaining balance in the event of a default.
• Prepayment: This section states whether there will be a prepayment penalty or if the borrower is allowed to pay a sum of money to the lender before it is due/demanded without a penalty for doing so.
• Attorney Fees and Costs: This section describes which party will be held responsible for attorney fees and court costs should a case be filed and adjudicated in court due to a default.
• Waiver of Presentments: This section allows the lender to receive payment without presenting the promissory note.
• Non-Waiver: This section states that the entire promissory note is not waived if either party waives an individual section of the document.
• Severability: This section states that the rest of the promissory note will still be valid should a particular section be found illegal or incapable of enforcement.
• Integration: This section states that the promissory note constitutes the entire agreement between the parties.
• Conflicting Terms: This section states that an amendment will resolve any issue(s) and be determinative should the promissory note include terms that conflict.
• Notices: This section states the required form of all notices, requests, demands, claims, and other communications under the note, including notice to the borrower that the lender may seek a judgment against the borrower without notice and the addresses to which all official or legal correspondence should be delivered.
• Governing Law: This section defines the state law that will govern the promissory note.
• Dated Signature: In Alaska, both unsecured and secured promissory notes must be signed and dated by the borrower, any co-signer, and the lender in front of two witnesses. There is no legal requirement for a promissory note to be notarized in Alaska. Still, the parties may decide to have the document certified by a notary public for protection in the event of a lawsuit.

Promissory Note Resources in Alaska

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                            

Help Center/Federal Student Aid               

CollegeScholarships.org 

Alaska Commission on Postsecondary Education   

NEA-Alaska (National Education Association)