Make a Florida Promissory Note

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

The maximum interest that may be charged under Florida State law depends on the loan amount. For loans of less than $500,000, the maximum interest rate is 18%. For loans over $500,000, the maximum interest rate is 25%.

How to Write a Florida Promissory Note

When writing a Florida promissory note, the first decision that must be made is whether the note is secured. The purpose of this is to ensure that the note is properly titled. Secured notes must be titled as such: Secured Florida Promissory Note. Without a proper title for the document, it can be difficult for a lender to enforce the note and collect collateral. Next, the promissory note should list the following information:

• The date that the promissory note was created between the parties. The date is placed beneath the title. Format the date as month, day, and year.
• The legal name and the mailing address of the borrower. The borrower should also be identified as the borrower. For example, Daniel Jones, Borrower. If the note is secured, it may be helpful for the lender to collect if the physical address of the borrower is also listed.
• The legal name and the mailing address of the lender. The individual or the entity acting as the lender should be identified. For example, Summer Jones, Lender; Jones Financial Loan, Lender.
• Document the principal loan amount. This is the original amount loaned to the borrower without listing the interest. Interest is listed on its own. Ensure that this number is accurate before printing and signing the agreement.
• The amount of interest charged. This may be listed as APR (annual percentage rate) or per annum (per year). In Florida, the maximum interest that may be charged for loans of $500,000 or less is 18%. For loans greater than $500,000, the maximum amount of interest rate that may be charged is 25%. Lenders who do not follow the law may face serious legal charges filed against them by the state.
• Payment information. Most Florida promissory notes are paid monthly. They may also be paid weekly or bi-weekly. Whatever agreement is made for the installment payments, make sure it is documented in the promissory note. It should also include the amount of the payment and how many payments must be made. If the lender charges a late fee on past due payments, it should be listed as well as when the fee is assessed.

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For secured Florida promissory notes, there are a couple of things to keep in mind. The first is to remember to include the proper information to identify the collateral. Failure to do so could make it next to impossible to enforce. Second, it’s important to read and understand the limitations put in place by Florida law. Failure to do either of those could mean that the secured note is unenforceable.

Florida promissory notes should also include the following clauses to explain the conditions of the agreement:

• Interest Due in the Event of Default. This explains how interest will be charged on the outstanding balance if the borrower defaults.
• Payment Allocation. This explains how received payments are divided between the principal balance and the interest. For example, 70% of the payment to the principal and 30% of the payment to the interest.
• Prepayment. Prepayment is a term that means the borrower pays off the loan before the end of the financing period. Some Florida promissory notes include a prepayment penalty for the borrower. This is an amount that a borrower must pay if they want to pay the loan off early.
• Acceleration. Acceleration means that the lender has a right to demand (or accelerate) that the remainder of the loan be paid immediately by the borrower. This generally happens when the borrower doesn’t follow the terms of the promissory note.
• Attorney Fees and Costs. If a disagreement arises over the promissory note, this explains how attorney fees and costs will be paid. Sometimes, the parties are responsible for paying their own attorney fees and costs. At other times, the borrower is responsible for paying the lender’s fees if the borrower is found in default of the agreement.
• Waiver of Presentments. The borrower is still required to make payments even if the lender isn’t physically present.
• Severability. If any part of the Florida promissory note is found to be unenforceable, the rest of the note remains in effect.
• Conflicting Terms. If conflicting terms are found, an amendment is created to clarify the confusion. That amendment will govern the agreement.
• Notice. An explanation to the borrower of whether they can expect the lender to inform them if the lender sues because of default.
• Governing Law. This explains which state will govern the agreement. This is particularly important if one party is in Florida and the other party is in a different state.

A Florida promissory note needs specific documentary stamps for tax purposes. The amount, as of 2018, is .35 cents tax per every $100 of the loan. This must be paid to the Florida Department of Revenue. The promissory note should be signed by the borrower and two witnesses.

A Sample Florida Promissory Note with Examples for Each Step

A Florida promissory note can be unsecured or secured; Florida imposes certain restrictions on promissory notes by statute. A Florida secured promissory must be titled as such: "Secured Florida Promissory Note." A secured promissory note 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 section:

• 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) in the event of default by the borrower.

The security interest in the specific 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 property.

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

• Definition of Terms: This section includes 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 Florida state law governing maximum 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 of payments, the amount of each payment, the due date of each payment, any late fee to be charged for late payment, and where and how payment is to be made.
• Allocation of Payments: This section describes how much of each payment will apply 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: This section provides the facts and protections 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 Florida 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 a certain 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 Florida, both unsecured and secured promissory notes must be signed and dated by the borrower, any co-signer, and two witnesses; the lender need not sign. There is no legal requirement for a promissory note to be notarized in Florida. Still, the parties may decide to have the document certified by a notary public for protection in the event of a lawsuit.

A Florida promissory note is subject to a documentary stamp tax. The tax is due on the full amount of the obligation evidenced by the taxable document at the rate of 35 cents per $100 or portion thereof and must be paid to the Florida Department of Revenue.

Promissory Note Resources in Florida

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

U.S. Department of Education   

Florida Department of Education