Make a Montana Promissory Note

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

In Montana, the maximum amount of interest is any amount in writing that does not exceed the greater of 15% or 6% over the Federal Reserve prime rate.

How to Write a Montana Promissory Note

When writing a Montana promissory note, it is important to name it properly. A secured note should be named as such. For example, Secured Montana Promissory Note. Without the proper title, the court may hold a secured note as unsecured. Then, certain information is listed to define the relationship and the terms of the agreement:

• The date the promissory note was created. The date the promissory note was created along with dated signatures can help prove the validity of the agreement. It can also be helpful if collection activities must occur because of default. Dates within the note should be written as month, day, and year.
• The identity of each party as well as their role in the agreement. Use the legal name for each party as well as their role within the agreement. For example, Phillip Jones, Co-signer.
• The address for each party. Each party to the contract should have their mailing address listed. For secured Montana promissory notes, include the physical address for both the borrower and any co-signer. If the lender processes payments through an address that is different from the mailing address, the payment address should be included in the loan repayment details.
• The principal amount of the loan. This is the amount provided to the borrower. It does not include the interest added to the loan. Interest is addressed separately. Before executing the agreement, it is important to verify that this amount is accurately documented.
• The interest charged for the loan. In Montana, this is expressed as either yearly interest, per annum, or annual percentage rate.
• Payment agreement. The payment agreement explains how the loan will be repaid. This includes how many payments must be made, the amount of each payment, the due date for each payment, and whether there is a late fee. The late fee amount should be documented as well as when it will be added to the account.

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For secured Montana promissory notes, it is important to provide detailed information about the collateral. Without this information, the court may not allow the lender to retrieve it.

Then, certain clauses are used to create the terms and conditions of the agreement. This is done by inserting clauses. Some of the common clauses found in a Montana promissory note include:

• Interest Due in the Event of Default. This clause states how much interest will be charged if the borrower defaults on the agreement.
• Payment Allocation. An explanation of how received payments are split between the principal amount and the interest.
• Prepayment. This is a term that means the borrower pays off the loan before the end of the payment term. This clause states whether the borrower will receive a financial penalty for prepayment.
• Acceleration. An acceleration clause gives lenders the right to demand immediate and full repayment of the outstanding balance.
• Attorney Fees and Costs. This clause explains how attorney fees and costs are handled if there is a legal disagreement related to the promissory note.
• Waiver of Presentments. This clause states that the lender is not required to be physically present when the borrower makes their payments.
• Severability. If a part of the agreement is found to be invalid, the rest of the agreement remains in effect.
• Conflicting Terms. This clause explains how any conflicting terms found in the Montana promissory note will be clarified.
• Notice. A notice clause states whether or not the lender will notify the borrower if they plan to file a lawsuit related to the promissory note.
• Governing Law. This clause documents the state whose laws will be used if there is a legal dispute.

There is no legal requirement to have a Montana promissory note notarized. However, it must be signed and dated by the borrower and any listed co-signer.

A Sample Montana Promissory Note with Examples for Each Step

A Montana promissory note can be unsecured or secured. A secured promissory note should be titled as such ("Secured Montana Promissory Note"); 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 Montana 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 Montana 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, the 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 clause explains 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 Montana 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 Montana, 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 Montana. 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 Montana

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

Montana Department of Public Health and Human Services (DPHHS)                                                          

Montana Higher Education Student Assistance Corporation (MHESAC)                                                    

Great Lakes Educational Loan Services, Inc.  

University of Montana