Massachusetts Promissory Note: What Is It?
A Massachusetts promissory note is a written promise between a lender and borrower. The lender promises to give the borrower a loan. The borrower promises to repay it according to the terms of the agreement. The parties of a Massachusetts promissory note are the lender, the borrower, and nay necessary co-signer. Promissory notes may be either secured or unsecured. When a promissory note is secured, the borrower promises to provide collateral. The lender collects the collateral if the borrower defaults on the loan. A car loan is an example of a secured Massachusetts promissory note. If the borrower doesn’t uphold the terms of the agreement, the lender can take the vehicle back. An unsecured promissory note does not have collateral. Promissory notes are subject to both contract law and securities law.
What Is the Maximum Amount of Interest That May Be Charged?
The maximum amount of interest that may be charged in a Massachusetts promissory note is 6%. Lenders who charge more could face serious legal charges.
How to Write a Massachusetts Promissory Note
A Massachusetts promissory note starts by choosing the proper title. If a secured Massachusetts promissory note isn’t titled as one, the court may hold that it is unsecured if a legal dispute occurs. Then, certain information is added to outline the scope of the agreement and the identity of the parties involved.
- The creation date for the promissory note. This date is listed below the title. It is listed as month, day, and year. The date of creation can help in the event that a legal dispute arises as well as any future collection activities that must occur.
- The identity of each party. The two main parties are the lender and the borrower. There may be a co-signer. Each party should be identified by their legal name as well as their role. For example, Tom’s Auto Financing, Ltd., Lender.
- The address of each party. This starts with the mailing address for each party. Then, if the promissory note is secured, the physical address of the borrower and any co-signer should be listed if it is different from the mailing address. If the lender’s payment address is different from the mailing address, the payment address should be listed with the payment arrangement information.
- The principal amount provided to the borrower. This is the amount of the loan provided without the interest charge. Before the Massachusetts promissory note is executed, ensure that this amount is correct.
- The interest rate for the loan. The maximum interest rate that may be charged in Massachusetts is 6%. This is most often expressed as per annum or as the annual percentage rate (APR).
- Information about paying the loan. This section includes how the loan will be repaid. The most common method of repayment is an installment agreement. The promissory note should list how many installments must be paid, when they are due, and the amount of each payment. It should also mention whether there is a late fee, the amount of the late fee, and when the late fee would be assessed.
If the Massachusetts promissory note is secured, it should include information to identify the collateral.
Then, there are some clauses used to explain the terms and conditions. The following is a list of some of the most commonly used clauses in Massachusetts promissory notes. It is not a complete list of clauses that one could use.
- Interest Due in the Event of Default. The purpose of this clause is to document the rate of interest that will be charged on the default balance.
- Payment Allocation. The payment allocation clause explains to the borrower how their payments are split between the balance and the interest.
- Prepayment. A prepayment clause explains whether the borrower will be penalized for paying off the loan before it is due.
- Acceleration. An acceleration clause gives the lender the right to demand the rest of the balance on the loan if the borrower does not comply with the terms.
- Attorney Fees and Costs. This clause explains how attorney fees and costs incurred because of a disagreement related to the promissory note will be handled by the parties.
- Waiver of Presentments. This clause states the lender isn’t required to be physically present at the time the borrower makes payments.
- Severability. If one section of the promissory note isn’t valid, the rest of the promissory note remains in effect.
- Conflicting Terms. If the promissory note has conflicting terms, an amendment will be created to clarify the conflict and govern the agreement.
- Notice. A notice clause states whether the lender will inform the borrower that they plan to file a lawsuit for default.
- Governing Law. This clause documents the state whose laws will be used if there is a legal disagreement related to the agreement.
There is no legal requirement to have a Massachusetts promissory note notarized or witnessed. It should be signed and dated by the borrower and any co-signer.
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