Make a Kansas Promissory Note

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

The State of Iowa controls interest rates. Under Contracts and Promises statutes, the highest interest rate that may be charged is 15% per year unless specifically authorized by law. If a lender charges more than the maximum amount, they may face legal repercussions for breaking the law.

How to Write a Kansas Promissory Note

Since a Kansas promissory note reflects a promise to repay a loan, it’s important to put it in writing. It should include specific information that explains why the promissory note was created and identifies the parties involved. However, the first step in creating a promissory note is to decide whether the note is secured. If it is secured, the title should include the word “secured.” Without the proper designation, a court may treat the note as unsecured if a lawsuit arises.

The following information should be included to outline the scope of the agreement:

• The date of creation for the promissory note. This is listed as month, day, and year. It is placed beneath the title.
• The legal names and mailing addresses of the parties involved in the agreement. The most common parties include the lender, the borrower, and a co-signer. The parties should also have their roles clarified. For example, ABC Financial, Inc., Lender. If the lender’s payment address is different from their mailing address, the payment address should also be listed in the agreement. If the note is secured, it is helpful to list the physical address for the borrower and any listed co-signer. This may help the lender with collecting collateral if the secured note is defaulted on by the borrower.
• The principal amount of the loan provided. This is the amount of money that the lender provided to the borrower without interest. Interest is addressed on its own. Before executing the promissory note, make sure that this amount is accurate.
• The amount of interest charged by the lender. Interest is often expressed as either “per annum” or annual percentage rate (APR). This is additional money that must be paid by the borrower for the privilege of being given a loan. In the State of Kansas, most promissory notes may not exceed 15% per year.
• Payment information. Most Kansas promissory notes are repaid through installments. The note should state how many total installments must be made, when they must be made, and the amount that must be paid for each installment. If the lender charges a late fee, the amount of the fee should be documented and when the late fee is added to the account. Lenders who use a separate payment address should list it here.

Need help making important financial decisions? With a Kansas power of attorney, you can name someone you trust to help you. Download a Kansas power of attorney now!

Secured Kansas promissory notes should include a description of the collateral that the lender is entitled to receive if the borrower does not pay as agreed.

After the agreement is outlined between the parties, it should include some basic clauses.

• Interest Due in the Event of Default. This clause explains how much interest will be charged if the borrower defaults on the loan. It is particularly important if the promissory note has a lower interest rate if the borrower complies. The higher interest rate (up to 15%) may be reserved for default.
• Payment Allocation. A payment allocation clause gives a breakdown of how the received payments will be split between the balance of the loan and the interest charged.
• Prepayment. When a borrower wants to pay off a loan before the end of the agreement, it is known as prepayment. This clause explains whether the borrower will be financially penalized in some way if they want to pay off the loan early.
• Acceleration. If the borrower does not comply with the terms of the Kansas promissory note, the lender may demand immediate payment in full.
• Attorney Fees and Costs. This clause explains how attorney fees and costs incurred by one or both parties will be handled if the court must intervene.
• Waiver of Presentments. With this clause, the lender is not required to be physically present when the borrower makes payments.
• Severability. This clause holds that if one part of the agreement is unenforceable, the rest of the agreement will still be in effect.
• Conflicting Terms. This clause addresses how any conflicting terms in the promissory note will be handled. Generally, it involves the creation of an amendment to clarify the confusion.
• Notice. This clause explains to the borrower whether the lender will notify them if they plan to sue for defaulting on the loan.
• Governing Law. A governing law clause determines the state whose laws govern the agreement in the event of a dispute.

Some Kansas promissory notes, such as those involved in buying a home, require a notary when the borrower signs it. Borrowers and any co-signers involved must sign and date the promissory note.

A Sample Kansas Promissory Note with Examples for Each Step

A Kansas promissory note can be unsecured or secured; promissory notes in Kansas are regulated by Kansas Promises and Contracts statutes. 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 Kansas 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 Kansas state law/Kansas Promises and Contracts statutes 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/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 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 Kansas 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 Kansas, both unsecured and secured promissory notes must be signed and dated by the borrower and any co-signer; the lender need not sign and no witness is required. Some Kansas promissory notes must be notarized, including those related to the purchase of a home. Even where not required, 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 Kansas

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Kansas Legal Services  

Kansas Department of Health and Environment

Kansas State Department of Education