Arkansas Promissory Note Form

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Arkansas Promissory Note: What Is It?

An Arkansas promissory note is a legally binding agreement between a lender and a borrower that commemorates a loan that takes place. For a promissory note to be legally binding, it must comply with Arkansas law. Where to find applicable laws related to promissory notes depend largely on why the promissory notes are issued. For example, Arkansas Code Title 4 regulates promissory notes that would fall under business or commercial law while promissory notes for loans related to higher education are regulated by Arkansas Code Title 6.

Arkansas promissory notes are either secured or unsecured. When a promissory note is secured, it means that the lender has the legal ability to take possession of an item of value if the borrower doesn’t pay off the note. An unsecured promissory note means that while there is a promise to repay the loan, there is no asset that is immediately available for the lender to get back some or all of what is owed to them.

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

Many promissory notes include interest. Arkansas law states that the parties can agree in writing to a payment of interest that doesn’t exceed the amount of maximum interest that may be charged. How much interest that may be charged depends on how the loan is structured. For example, the maximum rate of interest on a general loan is 5% above the federal discount rate. The legal maximum rate of interest is capped for consumers at 17%.

How to Write an Arkansas Promissory Note

Both unsecured and secured Arkansas promissory notes require some basic information. Secured promissory notes require information about the asset that is securing the loan. The following basic information should be included in a promissory note:

  • The date that the promissory note was created. This should be the full date: month, date, and year. It is helpful to spell out the name of the month as opposed to using an abbreviation.
  • The legal name and mailing address of the borrower. If the note is secured in some way, it is helpful to include the physical address of the borrower.
  • The legal name and mailing address of the lender.
  • The principal amount of the loan. This can be stated in numbers. Be sure to doublecheck this amount for typos.
  • The annual percentage rate charged by the lender. Remember, Arkansas state law sets the maximum amount of interest that may be charged. Charging more than the legal amount allowed can lead to big legal problems for the lender.
  • How payments are made. For example, are payments made in installments? The promissory note should list the full amount of the loan as well as the amount of any late fee that will be charged. If payments are being made, the amount of the payment as well as the type (for example, monthly or biweekly).

For secured promissory notes, it is important to include the fact that the promissory note is secured. It should also include information related to the asset that is acting as security. Otherwise, the note may not be considered secured.

There are specific clauses that should also be included in an Arkansas promissory note:

  • Interest Due in the Event of Default. This clause lists the amount of interest that will be charged if the borrower defaults on the loan. Remember, the amount of interest that may be charged is limited by state law.
  • Payment Allocation. This clause is important because it explains to the borrower how the payments that are made will be applied to the balance. Payments are generally split between both interest and the principal balance.
  • Prepayment. A prepayment clause explains whether the borrower will pay a penalty if they prepay the loan. Prepayment means to make a loan payment before it is due. Not all promissory notes penalize the borrower for making early payments.
  • Acceleration. An acceleration clause allows a lender to force the borrower to repay what’s left of the balance if the requirements of the promissory note aren’t met.
  • Attorney Fees and Costs. This clause relates to who will pay the attorney fees and costs if the parties go to court because the borrower defaults on the loan. Options include each party paying their own costs and fees or the borrower, if they’re found in default, will pay the attorney fees and costs for the lender.
  • Waiver of Presentments. This clause states that there is no requirement for the lender to be present in order for the borrower to make a payment on the promissory note.
  • Severability. This clause essentially states that if any clause or provision of the Arkansas promissory note is illegal or unenforceable, the remainder of the note is still in effect.
  • Conflicting Terms. This clause is important because it outlines that if there are conflicting terms within the note, an amendment will be drafted and attached. The amendment will clarify the conflicting issues and it will govern the promissory note.
  • Notice. This clause has several purposes. First, it is used to include information about how notification will take place (if at all) if the lender tries to get a judgment against the borrower. It may also include information about where official notices regarding the promissory note may be sent to the involved parties.
  • Governing Law. This clause clarifies which state will govern the contract.

For a promissory note to be binding, an Arkansas promissory note must be signed and dated by the borrower. If there is a co-signer, they should also sign and date the agreement. Arkansas promissory notes do not need to be notarized. However, having it signed in front of a notary can help reduce any questions regarding the document’s legitimacy.


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