Make a Louisiana Promissory Note

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

In Louisiana, the maximum amount of interest that may be charged is 12% per year. Lenders who charge more than the Louisiana limit may face serious legal repercussions.

How to Write a Louisiana Promissory Note

A Louisiana promissory note begins by choosing the type of note being created: secured or unsecured. If the promissory note is secured, the title should reflect that. Otherwise, if a lawsuit arises, the court may treat the note as unsecured. After the proper title is created, certain information must be included to outline the scope of the agreement between the parties.

• The date the promissory note was created. This date is listed as month, day, and year. It is listed beneath the title. The date is important because it helps determine the statute of limitations for collections if necessary.
• Identify the parties. Use the legal name for each party as well as their role in the agreement. For example, John Public, Borrower. If there is a co-signer, they should be identified as well. It’s also important to include the mailing address for the parties. For secured Louisiana promissory notes, it is important to list the physical address for both the borrower and the co-signer if it is different from their respective mailing addresses. This could help the lender collect collateral if necessary. If the payment address isn’t the same as the lender’s mailing address, the payment address should be listed with the payment information.
• The principal loan amount provided to the borrower. This amount is listed without interest. Interest is addressed on its own. Before the promissory note is executed, ensure that the amount listed is correct.
• The interest charged on the loan. This is often expressed as “per annum” or “annual percentage rate (APR). The most that may be charged in the State of Louisiana is 12% per year.
• The payment information. The most common payment agreement made for Louisiana promissory notes is an installment plan. An installment is an amount paid at agreed-upon intervals. The most common installment plan is a monthly installment. It should be the number of installments that will be paid over the life of the loan, when the payments are due, the amount for each payment, and information about any late fee that may be charged (including the amount of the fee).

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For secured Louisiana promissory notes, include identifying information for the collateral.

After the basic information is presented, it is important to include some basic clauses. This isn’t a full list of clauses that may be used. It represents the most commonly used clauses:

• Interest Due in the Event of Default. This clause explains the amount of interest that will be charged if the borrower defaults on the agreement.
• Payment Allocation. Payment allocation refers to how payments are split between the principal balance and the interest charged for the loan.
• Acceleration. An acceleration clause explains that if the borrower does not adhere to the terms of the promissory note, the lender may demand immediate repayment on the unpaid portion.
• Attorney Fees and Costs. This clause outlines how attorney fees and costs incurred by one or both parties will be handled if there is a legal dispute related to the promissory note.
• Waiver of Presentments. This clause states that the lender does not have to be physically present for payments to be made by the borrower.
• Severability. This clause states that if one part of the promissory note is found to be unenforceable that the rest of the note will remain in effect.
• Conflicting Terms. This clause explains how any conflicting terms will be resolved. It is usually done by creating an amendment that will govern the agreement.
• Notice. A notice clause explains whether the lender will inform the borrower if they plan to sue the borrower for default.
• Governing Law. A governing law clause lists the state whose laws will be used to govern the agreement and any legal dispute that arises from it.

Depending on the type of Louisiana promissory note being created, it needs to be signed by the borrower (and any co-signer) as well as being signed by a witness.

A Sample Louisiana Promissory Note with Examples for Each Step

A Louisiana promissory note can be unsecured or secured; promissory notes in Louisiana are regulated by the Louisiana Uniform Commercial Code and Louisiana Civil Code. 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 Louisiana 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 Louisiana 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/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: Representations and warranties in a promissory note supply facts and protection 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 default and the interest due upon default (as allowed by applicable Louisiana 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 Louisiana, both unsecured and secured promissory notes of certain types must be signed and dated by the borrower, any co-signer, and a witness; the lender need not sign. There is no legal requirement for a promissory note to be notarized in Louisiana.  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 Louisiana

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Louisiana Office of Student Financial Assistance

Louisiana Education Loan Authority (LELA)