Make a Indiana Promissory Note

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

Under Indiana’s usury law, the maximum interest rate that may be charged on loans of less than $50,000 is 21%. The law also states that judgment interest rates cannot be greater than 8%. If there isn’t a written contract between the parties, the law states that the lender may not charge more than 8% interest. If you are lending money, you should review the law, which was changed in 2020, and consult an attorney.

How to Write an Indiana Promissory Note

An Indiana promissory note should be titled in a way that reflects whether or not it is secured. Otherwise, a legal dispute would likely result in the note being treated as unsecured. Then, there is certain information along with some basic clauses that should be included.

• The date the parties enter into the promissory agreement. This date is listed under the title. It should be listed as month, day, and year.
• The legal names and mailing addresses of the parties. The parties should also be designated by their titles: lender, borrower, and, if necessary, a cosigner. If the Indiana promissory note is secured, including the physical address of the borrower can make it easier to retrieve the collateral if it becomes necessary to do so. If the payment address is different from the lender’s mailing address, the payment address should be included in the section that discusses payments.
• The principal amount of the loan. This is the amount that the borrower receives. It does not include interest. Interest is mentioned in its own section. Before executing an Indiana promissory note, double-check that the amount listed as the principal balance is accurate.
• Interest. Interest is expressed either as per annum (per year) or as the annual percentage rate (APR). In Indiana, the amount of interest that may be charged depends on the amount of the loan and whether the agreement is in writing.
• Payments. Most Indiana promissory notes are repaid through installments. That is a certain amount of money paid at certain intervals. Monthly installments are most common. This section should list the total number of installments that must be paid, the amount of each payment, and whether a late fee will be assessed for late payments. If there is a late fee, the amount of the late fee should be listed.

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For secured Indiana promissory notes, an accurate description of the collateral must be included. Failure to include this information could result in the court treating the agreement as unsecured.

There are some basic clauses that should also be included:

• Interest Due in the Event of Default. This is important when it comes to Indiana promissory notes because state law mentions an interest rate that is used if the lender gets a default judgment against the borrower. This clause is used to list the amount of interest that the borrower is responsible to pay if they default on the loan.
• Payment Allocation. This clause clarifies how payments are split between the principal balance and the interest amount.
• Prepayment. Prepayment occurs when a borrower pays their loan off before it is scheduled to end in the agreement. This clause mentions whether the borrower is penalized for paying off the loan early.
• Acceleration. This clause gives the lender the right to demand immediate repayment of the remaining balance if the borrower violates the terms of the agreement.
• Attorney Fees and Costs. If a legal dispute arises over the promissory note, this clause governs how attorney fees and costs will be paid.
• Waiver of Presentments. This clause states that the lender does not have to be present for payments to be made on the loan.
• Severability. A severability clause keeps the rest of the agreement in effect if one provision is found to be unenforceable.
• Conflicting Terms. Addresses how conflicting terms will be handled, if any are found. It most commonly involves the creation of an amendment to clarify the terms.
• Notice. This clause explains whether the lender will notify the borrower if they plan to file a lawsuit against them for default.
• Governing Law. A governing law clause determines the state whose laws will be used to govern the agreement.

An Indiana promissory note should be dated at the time it is signed. It should be signed by the borrower. If a co-signer is necessary, they should also date and sign the agreement. The signature should be signed by a witness as well as notarized.

A Sample Indiana Promissory Note with Examples for Each Step

An Indiana promissory note can be unsecured or secured; Indiana promissory notes are regulated by the Indiana security and usury laws. 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 piece of property.

Both unsecured and secured promissory notes in Indiana 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 Indiana 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 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 explains 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 Indiana 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 Indiana, both unsecured and secured promissory notes must be signed and dated by the borrower and any co-signer; the lender need not sign. The promissory note should be signed by a witness and notarized.

Promissory Note Resources in Indiana

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid       

CollegeScholarships.org

INvestEd Student Loan   

Indiana Legal Services, Inc.

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