Maine Promissory Note: What Is It?
A Maine promissory note is a written agreement between a lender and a borrower. The lender provides a loan. The borrower and a co-signer (if necessary) sign the agreement. The signature(s) acknowledge the loan was received and acts as a promise to repay the loan according to the terms listed within the Maine promissory note. Promissory notes may be secured or unsecured. When it is secured, the borrower promises that if they do not pay as agreed, the lender is entitled to collateral. An unsecured loan isn’t guaranteed by collateral. Maine promissory notes are subject to contract laws and securities laws.
What Is the Maximum Amount of Interest That May Be Charged?
Unless stated differently in a written promissory note, the maximum amount of interest that may be charged in Maine is 6%. If the lender provides a higher interest rate within the promissory note and the borrower signs it, the borrower is agreeing to the written rate.
How to Write a Maine Promissory Note
First, determine whether the Maine promissory note will be secured. If it is secured, it should be titled as such: Secured Maine Promissory Note. Without the proper title, a legal dispute may result in the note being treated as unsecured. Following the title, the following information should be included to outline the scope of the agreement between the parties.
- The date the promissory note was written. This date belongs directly under the title. It is listed as month, day, and year. The date helps clarify when the parties entered into the agreement. This is important for several reasons. One of those reasons revolves around whether collection methods may be required in the future. Collection activities are limited by a statute of limitation. The date can also help prove to the court when the parties entered into the agreement.
- Identification of the parties. The legal name of the individuals or entities involved as well as which party they are should be used. For example, Jacob Smith, Borrower. This section should also list the mailing address for each party. If the note is secured, the physical address of the borrower and co-signer should be included. This may aide in the collection of collateral if it becomes necessary. If the lender’s mailing address is different from their payment address, the payment address should be listed with the payment arrangement information.
- The principal amount loaned. This is the full amount of the loan without the interest charged for the loan. Ensure that this number is accurate before the document is executed.
- The interest rate charged for the loan. In Maine, the borrower and lender can agree upon a higher interest rate than what is listed in usury law (6%). The amount being charged as interest should be listed. If there is no amount, the lender may not charge more than 6%.
- The payment arrangement. For Maine promissory notes, the most common payment arrangement is an installment plan. The installment method may be weekly, biweekly, or monthly. The number of installments required to pay off the loan should be listed as well as the amount due for each installment. It’s also important to list the due date for the payments and whether a late fee will be assessed. List the amount of the late fee and when it will be added on to the account.
If the promissory note is secured, put identifying information about the collateral within the document. Without it, a court may not treat the note as secured.
Next, a Maine promissory note should include some basic clauses that define the terms and conditions of the contractual relationship between the parties. The following is a partial list of the most common clauses used in promissory notes:
- Interest Due in the Event of Default. This clause states the amount of interest charged if the borrower defaults on the loan. Remember that unless the interest rate is specifically mentioned in a Maine promissory note, the most that may be charged is 6%.
- Payment Allocation. This clause states how payments received will be split between the principal balance and what’s charged as interest. For example, 60% of the payment is applied to the principal balance and 40% will be applied to interest.
- Acceleration. The acceleration clause provides the lender with the right to demand full repayment if the borrower violates the agreement.
- Attorney Fees and Costs. This clause explains how any incurred attorney fees and costs of either or both parties will be handled for a dispute over the promissory note.
- Waiver of Presentments. This clause states that the lender doesn’t have to be physically present to receive payments.
- Severability. A severability clause enforces the rest of the agreement if one part of the agreement is thrown out for legal reasons.
- Conflicting Terms. A conflicting terms clause explains that if there are any terms that conflict, something will be done to clarify the conflict. The most common way to complete this is to create an amendment. The amendment governs the conflicting terms.
- Notice. The purpose of this clause is to inform the borrower whether they’ll be notified if the lender plans to sue them for defaulting on the agreement.
- Governing Law. This clause documents which state whose laws will be used to govern the agreement and any legal dispute that arises from it.
A Maine promissory note does not need to be witnessed or notarized unless it involves a mortgage. However, it should be signed by the borrower and any co-signer who is part of the agreement. The signatures should also be dated.
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