Make a Idaho Promissory Note

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

For personal loans, the maximum amount of interest that may be charged is 12%. However, for interest related to receiving a monetary judgment (also known as the judgment rate), that interest rate is changed by the Idaho State Treasurer’s Office each year. If a lender charges more than the maximum interest rate, they may be subject to legal charges by the State of Idaho.

How to Write an Idaho Promissory Note?

An Idaho promissory note needs to include vital information about the parties involved as well as the loan. It also needs to include information about collateral, if the note is secured, and specific clauses. Secured promissory notes should be titled as such.

Here is the information that needs to be included:

• The date the Idaho promissory note was created. This date is placed beneath the title. It is formatted as month, day, and year.
• The borrower’s legal name and mailing address. Put the word “borrower” next to their name. For secured promissory notes, include the physical address if it is different from the mailing address.
• The lender’s legal name and mailing address. The lender may be an individual or an entity. The lender should be titled as such. If the payment address is different from the mailing address, that information should also be included.
• The principal amount. The amount of the loan, without interest, is known as the principal amount or principal balance. Ensure that the amount is accurate before it is properly executed. This is important since this document may be legally binding once it’s signed and dated.
• The amount of interest charged for the loan. This may be expressed as the per annum interest rate or the annual percentage rate (APR). Idaho usury law states that this amount can be no more than 12%. For judgment rates, consult the Idaho State Treasurer’s Office website to ensure compliance with the law if the borrower defaults.
• Payment information. The most common method of payment for Idaho promissory notes is the installment method. Borrowers make payments on a regular basis. The most common installment arrangement is monthly payments. The total number of installments and the payment amount for each should be listed. If the lender uses a late fee, the amount of the late fee should be listed and how many days past the due date the late fee will be assessed.

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Secured Idaho promissory notes need another piece of crucial information: information about the collateral that the lender may take possession of if the borrower defaults on the loan.

Idaho promissory note should include certain clauses to explain the terms and conditions of the agreement. The basic clauses include:

• Interest Due in the Event of Default. This clause explains how much interest the borrower will be required to pay if they default on the loan. Remember that the lender should consult the Idaho State Treasurer’s Office for the proper information.
• Payment Allocation. This clause explains how the borrower’s payments will be split between the principal balance and the interest.
• Prepayment. Sometimes, borrowers want to pay off their loan early. This is known as prepayment. A prepayment clause explains whether there are any penalties for paying off the loan early.
• Acceleration. An acceleration clause informs the borrower that if they do not uphold their obligations, the lender may demand full payment of the loan.
• Attorney Fees and Costs. If there is a problem that arises over the Idaho promissory note, this clause explains who will pay attorney fees and costs. It could be that each party pays its own fees and costs. It could also be that the borrower is required to pay the fees and costs for the lender if the borrower is found in default by the court.
• Waiver of Presentments. This clause explains to the borrower that they must make payments even if the lender is not physically present when those payments are made.
• Severability. A severability clause states that if any part of the promissory note is unenforceable, only that part shall not be enforced. The rest of the promissory note will still be in effect.
• Conflicting Terms. If conflicting terms are found in the promissory note, this clause explains that an amendment will be drafted to clarify the terms. The amendment will override the conflicting terms.
• Notice. A notice clause explains whether the lender will give notice to the borrower if they file a lawsuit for default.
• Governing Law. This clause documents the state that will govern the agreement. This is especially important if the parties to the note are located in different states.

In Idaho, there is no legal requirement to have the lender sign the promissory note. It also does not need to be witnessed or notarized. The borrower must sign and date the promissory note. If there is a co-signer, it is important to have their information in the document and also to have them sign the promissory note.

A Sample Idaho Promissory Note with Examples for Each Step

An Idaho promissory note can be unsecured or secured. A secured promissory note should 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 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 Idaho 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 Idaho 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 clause 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 the Idaho State Treasurer's Office, which changes the maximum interest rate related to monetary judgments each year).
• 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 Idaho, both unsecured and secured promissory notes must be signed and dated by the borrower and any co-signer; the lender need not sign. There is no legal requirement for a promissory note to be witnessed or notarized in Idaho. 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 Idaho

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Idaho Legal Aid Services, Inc.