Missouri Promissory Note: What Is It?
A Missouri promissory note is a written contract where the borrower promises to repay the loan received by the lender. A co-signer may also be involved. Missouri promissory notes are either secured or unsecured. A simple example of a secured promissory note is a car loan. If the borrower does not fulfill the terms of the agreement, the lender has the legal right to retrieve the vehicle. The vehicle involved is the collateral. For unsecured Missouri promissory notes, there is no collateral promised. Promissory notes are governed by contracts law. Some are also required to comply with securities law.
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, include the physical address for the borrower and the co-signer. 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 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.
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 physical 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.
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