Make a Missouri Promissory Note

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

The maximum amount of interest that may be charged in a Missouri promissory note is 10%. However, there are some exceptions to this. For example, the parties may agree in writing to charge an interest rate that doesn’t exceed the “market rate.”

How to Write a Missouri Promissory Note

It’s important for a promissory note to be properly titled. A secured promissory note should be titled as such. Otherwise, a court may decide to treat the note as unsecured. A Missouri promissory note should include information about the parties involved and the repayment conditions so that the relationship and terms are clearly documented. To do so, the following information should be included:

• The date of creation and dated signatures. These dates are extremely important because they are used in different ways. It verifies that the note was entered into by the parties on a certain date. It also helps determine how long the lender has for collections if it becomes necessary. The dates should be formatted as month, day, and year.
• The identity of each party along with their roles. The legal names of the parties should be included as well as their role within the contract. For example, PDQ Automobile Loans, Inc., Lender. If there is a co-signer, their legal name and role must be included.
• The address for each party. The mailing address for each party should be listed. Additionally, if the promissory note is secured, including the physical address for the borrower and the co-signer may make it easier to retrieve the collateral if it becomes necessary. If the lender has a separate address for payments, that address should be included in the payment arrangement information.
• The principal amount loaned to the borrower. This is the amount that the lender agreed to provide to the borrower without the interest. This number should be checked for accuracy before the document is executed.
• The interest rate. Most Missouri promissory notes do not exceed 10% interest per year. However, the law does give exceptions as to when a higher interest rate may be charged. The interest rate is listed as per annum, annually, or as the annual percentage rate (APR).
• Payment information. Payment information is a key piece of a Missouri promissory note because it explains how the borrower will repay the loan. This section should include the number of payments in total that will be made (referred to as installments), the amount of each payment, when each payment is due, and if there is a late fee that will be assessed. The amount of the late fee should be documented here.

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If the Missouri promissory note is secured, it should include a description of the collateral. Without a proper description, the court may hold the note as unsecured.

Following the basic information required to identify the parties, the loan, and how the loan will be repaid, there are several clauses that may be used to create the terms and conditions of the agreement. The following is a partial list of common clauses:

• Interest Due in the Event of Default. If the borrower defaults on the agreement, they may be required to pay a higher interest rate.
• Payment Allocation. Explains how payments received are split between the balance and the interest charged on the loan.
• Prepayment. Prepayment means that the borrower wants to pay off the loan before the actual term of the loan ends. This clause states whether the borrower will be financially penalized if the borrower pays the loan off before the end of the contractual agreement.
• Acceleration. If the borrower does not comply with the terms of the agreement, the lender may demand immediate and full repayment.
• Attorney Costs and Fees. If the parties have attorney fees and costs because of a disagreement related to the agreement, this clause explains how the costs and fees will be handled.
• Waiver of Presentments. The lender is not required to be physically present for the borrower to make payments.
• Severability. If one part of the agreement is invalid, the rest of the agreement will remain in effect.
• Conflicting Terms. If conflicting terms are found in the promissory note, this clause explains how those terms will be clarified.
• Notice. This clause is used to inform the borrower whether the lender will notify them if they plan to sue.
• Governing Law. A governing law clause lists the state whose laws will be used for legal disagreements.

There is no legal requirement to have a Missouri promissory note notarized. The promissory note needs to be signed and dated by the borrower and any co-signer.

A Sample Missouri Promissory Note with Examples for Each Step

A Missouri promissory note can be unsecured or secured; promissory notes in Missouri are regulated by contract law and, in some cases, 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 piece of property.

Both unsecured and secured promissory notes in Missouri 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 Missouri 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 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: Representations and warranties explain 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 Missouri 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 Missouri, 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 promissory notes to be witnessed or notarized in Missouri. 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 Missouri

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Missouri Department of Higher Education and Workforce Development (MDHEWD)