Make a Georgia Promissory Note

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

Each state has a usury law that determines the maximum amount of tax that may be charged on a loan.

Georgia law states that interest rates may not be higher than 7% per year if the promissory note does not list an interest rate. Additionally, if the amount loaned is less than $3,000, the lender may not charge more than 16% interest. For loans greater than $250,000, a lender may charge any interest rate they wish as long as it is in writing as part of the promissory note.

There is a specific clause placed within a Georgia promissory note that can be used to explain the amount of interest being charged.

How to Write a Georgia Promissory Note

The first step to create a Georgia promissory note is to determine whether it is secured. If it is, the title should reflect it: Secured Georgia Promissory Note. Without a proper title, it can make the litigation process more complicated if the lender needs to collect the collateral promised. Moving forward, some basic information is required:

• The date the parties enter into the promissory note. This date is found underneath the title of the promissory note. It is formatted as month, day, and year.
• The legal name of the borrower and their mailing address. The borrower may also be called the promisor in a Georgia promissory note. It is beneficial to identify the borrower or promisor as such. For example, Susan Jones, Borrower. The mailing address may be used for notices or even mailing receipts after payment is received.
• The legal name of the lender and their mailing address. The individual or entity making the loan should be identified. For example, Pandora Jones, Lender; Pandora’s Loan Service, LLC.
• The amount of the principal. This is the amount borrowed and does not include interest. Before printing and signing a Georgia promissory note, ensure that this number is accurate.
• Interest charged on the loan. If the amount of interest is not preserved in writing, the most that may be charged is 7% per year. When putting the amount in writing, the amount of money loaned is a consideration. For loans less than $3,000, the lender may not charge more than 16% interest. If the loan is greater than $250,000, the lender may charge any interest rate they want. The key here is for the lender to remember that they must put the interest rate in writing.
• Payment explanation. Loans documented in a Georgia promissory note are most often paid in installments. The promissory note should explain how often the installments are due (for example, monthly), how much should be paid for each installment, and how many payments must be made in total. If the lender charges a late fee, the amount of the late fee should be documented and when the late fee will be assessed.

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For secured Georgia promissory notes, it’s imperative to include descriptive information about the collateral. Without it, a court may treat the promissory note as unsecured.

Georgia promissory notes include specific clauses that explain the conditions of the agreement. These include:

• Interest Due in the Event of Default. In some promissory notes, an interest rate may be relatively low unless the borrower defaults on a payment. Then, the interest rate may increase. This clause explains the interest rate that will be charged if the borrower defaults.
• Payment Allocation. It’s important to clarify in the promissory note how the payments are split between the principal loan balance and the interest.
• Prepayment. Prepayment is a term that means the borrower or promisor is paying off the loan before the end of the financing term. Some Georgia promissory notes include a prepayment penalty. This is an amount that must be paid by the borrower if they pay the loan off early.
• Acceleration. If the borrower does not comply with the terms of the promissory note, the lender has the right to demand full payment on the remaining balance.
• Attorney Fees and Costs. When a legal disagreement occurs over the promissory note, this clause explains who will pay for attorney fees and costs. Sometimes, the arrangement is that the parties pay their own costs. It is also common for this clause to state that if the lender sues because of default and receives a court judgment, the borrower will be responsible for paying the lender’s attorney fees and costs.
• Waiver of Presentments. The borrower must make payments even if the lender isn’t physically present when the payment is made.
• Severability. If one part of the Georgia promissory note is found to be unenforceable, the rest of the document will remain in effect.
• Conflicting Terms. This clause explains that if conflicting terms exist within the promissory note, an amendment will be created to clarify the conflict and govern it.
• Notice. Explain whether the lender will inform the borrower if they plan to sue the borrower for being in default of the note.
• Governing Law. This explanation determines which state will govern the agreement. This is important, particularly if one party is in Georgia and the other party is in another state.

A Georgia promissory note must be signed and dated by the borrower and a witness. It should also be notarized.

A Sample Georgia Promissory Note with Examples for Each Step

A Georgia promissory note can be unsecured or secured. A secured promissory note should be titled as such ("Secured Georgia Promissory Note"); 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 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 Georgia 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 Georgia 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, the 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 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 supplies 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 Georgia 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 Georgia, both unsecured and secured promissory notes must be signed and dated by the borrower, any co-signer, and a witness; the lender need not sign. In addition, the promissory note should be notarized.

Promissory Note Resources in Georgia

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Georgia's Own Credit Union   

GAfutures                                                

Team Georgia