Make a New Mexico Promissory Note

What Is the Maximum Interest Rate Charged in New Mexico?

In New Mexico, the maximum interest rate that may be charged for promissory notes is 15%. If a lender charges more than 15%, they could very well face serious legal repercussions.

How to Write a New Mexico Promissory Note

The first step taken when writing a New Mexico promissory note is to decide whether the note is secured or unsecured. If the note is secured, make sure that the word “secured” is used in the title. For example, “New Mexico Secured Promissory Note.” If a secured note is not titled correctly, a legal dispute could result in the court treating the agreement as unsecured. After the proper title, include the following information to create the details of the agreement:

• The date of creation for the promissory note. This date, as well as the date that the document is signed, is extremely important because it helps prove that the contract is valid between the parties. The dates also influence legal deadlines for certain activities, such as filing a lawsuit for defaulting on the payments or for engaging in collections activities.
• Identifying information and role within the agreement. Every party should be identified by its legal name along with its role. This includes co-signers. For example, Blue Dog Auto Company, Inc., Lender.
• The mailing address for each party. List the full mailing address for each party. If the New Mexico promissory note is secured, include the physical address for the borrower and any listed co-signer. If the lender has both a mailing address and a payment address, the payment address should be documented with the repayment agreement.
• The principal loan provided to the borrower. This amount does not include the interest charged on the loan. Before the New Mexico promissory note is executed, this amount should be reviewed for accuracy.
• The yearly interest rate charged on the loan. This may not exceed 15% under New Mexico law. In the promissory note, this may be listed as the annual percentage rate (APR), yearly interest rate, or per annum.
• Payment agreement. The payment agreement portion outlines how the borrower will repay the loan. This should include the number of installments the borrower will pay to satisfy the loan, the amount for each payment, and the due date for each payment. If the lender will charge a late fee, the amount of the late fee and when it will be assessed. This is the section where the lender’s payment address should be listed.

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If the promissory note is secured, there should be a description of the collateral. Without a description, a legal dispute could mean that the court treats the note as unsecured.

After the general information related to the parties and the loan, a New Mexico promissory note then uses certain clauses to create the terms and conditions of the agreement. Below, you’ll find a list of commonly used clauses:

• Interest Due in the Event of Default. Many promissory notes start with a lower interest rate and then charge a higher interest rate if the borrower defaults on the agreement in some way. This clause lists the amount of interest that will be charged if the borrower does not comply with the note. This amount may not exceed the state maximum.
• Payment Allocation. A payment allocation clause defines how payments are split between the principal loan and the interest.
• Prepayment. A prepayment clause explains whether the borrower will face a financial penalty for paying off the loan early.
• Acceleration. Acceleration is the lender’s legal right to immediately demand payment in full if the borrower does not comply with the terms of the agreement.
• Attorney Fees and Costs. For parties involved in a legal dispute over the New Mexico promissory note, this clause explains how attorney fees and costs are handled.
• Waiver of Presentments. The purpose of this clause is to state that the lender’s actual presence is not required at the time the borrower makes payments.
• Severability. A severability clause keeps the rest of the promissory note in effect if one portion of it is found to be invalid.
• Conflicting Terms. This clause explains how any conflicting terms within the agreement will be clarified.
• Notice. This clause states whether the lender will notify the borrower if they plan to sue because of 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 Mexico promissory note notarized. To properly execute the note, it should be signed and dated by the borrower and any listed co-signer.

A Sample New Mexico Promissory Note with Examples for Each Step

A New Mexico promissory note can be unsecured or secured. A secured promissory note must be titled as such ("New Mexico Secured 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 property.

Both unsecured and secured promissory notes in New Mexico 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 New Mexico 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: The representations and warranties clause provides 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 New Mexico 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 New Mexico, 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 New Mexico. 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 New Mexico

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

New Mexico Educational Assistance Foundation (NMEAF)  

New Mexico Higher Education Department    

The University of New Mexico School of Law