Make a Maine Promissory Note

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

Unless stated differently in a written promissory note, the maximum 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 agrees 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 limitations. 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 and 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 aid 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 and 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 to the account.

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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 the 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.

A Sample Maine Promissory Note with Examples for Each Step

A Maine promissory note can be unsecured or secured; promissory notes in Maine are regulated by contract and securities law. 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 Maine 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 Maine state law governing maximum interest/usury rates for written contracts, unless the borrower and lender agree on a higher interest rate), 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 section 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 applicable Maine 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 Maine, 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 Maine unless it involves a mortgage. 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 Maine

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

Finance Authority of Maine (FAME)     

Maine Revenue Services/Opportunity Maine Tax Credit  

Maine Education Association