New Jersey Promissory Note: What Is It?
A New Jersey promissory note is a written agreement between a lender and a borrower. It documents the existence of a loan given and the terms of repayment. New Jersey promissory notes are secured or unsecured. With a secured promissory note, the borrower promises to turn over a certain piece of collateral, described in the note, if they default on the loan agreement in some way. An unsecured New Jersey promissory note is essentially a signature loan. The parties involved in the note are the lender, the borrower, and, occasionally, a co-signer.
What Is the Maximum Amount of Interest That May Be Charged?
Under New Jersey usury law, the maximum amount of interest that may be charged in a promissory note is 16%. Lenders who charge more than the legal maximum could face serious legal repercussions.
How to Write a New Jersey Promissory Note
When writing a New Jersey promissory note, it is important to give it an appropriate title. If the promissory note is secured, make sure that the word “secured” appears in the title. For example, New Jersey Secured Promissory Note. A proper title is a necessity because in the event of a legal dispute, an improper title could lead to the note being treated as unsecured by the court. Following the title, certain information is used to outline the scope of the relationship between the parties and the repayment agreement:
- The date of creation for the New Jersey promissory note. This is the date that the parties are entering into the agreement. This date, along with the date of the signatures, are important. They help prove the validity of the agreement as well as help determine the statute of limitations for future legal action. The dates within the note should be formatted as month, date, and year.
- Identity of each party and their role within the promissory note. The parties are the lender and the borrower. If there is a co-signer, they should also be identified. Use the legal name of the person or entity along with their role. For example, Cash Cars Auto Finance, Inc., Lender.
- The mailing address for each party. In addition, the full mailing address for each party, secured promissory notes should also list the physical address of the borrower and any listed co-signer if it is different from the mailing address. Lenders may have a separate payment address. When this happens, the payment address should be listed with the repayment agreement. This will help ensure that payments sent are received and properly processed without delay.
- The principal amount of the loan. This is the amount borrowed without the interest charged on the loan. Before executing a New Jersey promissory note, review this amount to make sure that it is correct.
- The interest rate. This is the amount of yearly interest charged for the loan. In New Jersey, this may not exceed 16%. The amount of interest may be expressed as yearly interest rate, per annum, or annual percentage rate (APR).
- Payment agreement. This portion of the New Jersey promissory note outlines how the loan provided will be repaid. Include the number of payments that must be made over the life of the loan (generally referred to as installments), the amount of each payment, and when each payment is due. If there is a late fee that is assessed, the amount of the fee as well as when it is added on should be listed. If the lender has a special address for payments, it should be included here.
If the New Jersey promissory note is secured, include an accurate description of the collateral. If there is no description, a legal dispute could cause the court to treat the note as unsecured.
Following the above information, there are certain clauses used to create the terms and conditions that must be followed. Some of the most popular clauses in New Jersey promissory notes are:
- Interest Due in the Event of the Default. This interest rate is what the borrower will pay if they do not comply with the terms of the loan. It is typically higher than the amount of interest initially charged for the loan, but it may not exceed 16%.
- Payment Allocation. This clause documents how payments made by the borrower are split between the principal and the interest.
- Prepayment. This clause states whether the borrower will face a financial penalty for paying the loan off early. Paying the loan off before the end of the agreed upon term is known as prepayment.
- Acceleration. If the borrower defaults on the promissory note terms, the lender has the legal right to immediately demand full repayment of the outstanding balance.
- Attorney Fees and Costs. In the event of a legal dispute between the lender and the borrower, this clause explains how attorney fees and costs will be handled.
- Waiver of Presentments. There is no legal requirement for the lender to be physically present when the borrower makes a payment.
- Severability. If one portion of the New Jersey promissory note is found to be unenforceable, the rest of the note is still valid.
- Conflicting Terms. If there are conflicting terms, this clause states how those terms will be clarified.
- Notice. Whether the lender will notify the borrower if they plan to sue the borrower for default.
- Governing Law. This is the state whose laws will be followed if there is a legal dispute related to the promissory note.
There is no legal requirement to have a New Jersey promissory note notarized. To execute the note, it must be signed and dated by the borrower and any listed co-signer.
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