Make a North Dakota Promissory Note

What Is the Maximum Interest Rate That May Be Charged in North Dakota?

The maximum interest rate that may be charged in North Dakota is 6% unless the parties agree in writing that the interest rate can be up to 5.5% more than the average interest rate of U.S. Treasury bills.

How to Write a North Dakota Promissory Note

Writing a North Dakota promissory note is fairly straightforward. Certain information is necessary to help shape the agreement and show the relationship between the parties. First, though, the document must be titled appropriately. Secured promissory notes should be titled as such. For example, North Dakota Secured Promissory Note. After the title, some basic (but important) information is necessary to outline the agreement between the parties:

• The date the promissory note was created. This date appears below the title of the promissory note. This date, along with the date of the borrower’s signature, helps prove the validity of the agreement as well as determining the statute of limitations for legal actions related to the promissory note.
• Party identification. The lender and borrower should be identified by their legal name and their roles in the agreement. If there is a co-signer, they should also be identified.
• Mailing address for each party. This should include the city, state, and zip code. If the note is secured, the physical address for the borrower and the co-signer should be included if it’s different from their mailing address(es). Sometimes, lenders have a mailing address and a separate address for payment processing. The payment processing address should be listed with the repayment information.
• The principal loan amount. This is the amount of money loaned to the borrower. The amount listed here does not include the interest charged for the loan. This amount should be checked for accuracy before the document is executed.
• The interest rate for the loan. This is the amount of interest that the lender charges yearly for the loan. It is expressed as an annual percentage rate (APR), per annum, or yearly interest rate.
• Payment agreement. This section explains how the borrower will repay the loan. It includes the number of payments, the due date for each payment, and the amount of each payment. The payment processing address for the lender should also be listed in this section. If there is a late fee, the amount of the fee and when it is added to the account should be documented here as well.

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If the North Dakota promissory note is secured, the note should include information about the collateral that the lender is allowed to collect if the borrower defaults. Without this information, a court might treat a secured note as unsecured.

After the basic information, a North Dakota promissory note will then include clauses to create the terms and conditions. The most common clauses are:

• Interest Due in the Event of Default. The interest rate if the borrower defaults is often higher than the initially agreed-upon rate. This clause states the amount of interest charged for defaulting on the agreement.
• Payment Allocation. This is how payments received are split between the interest accrued and the principal loan.
• Prepayment. This clause states whether the borrower will pay a financial penalty if they want to pay the loan off before the end of the loan period.
• Acceleration. An acceleration clause gives the lender the right to demand immediate repayment of the loan if the borrower does not comply with the terms of the loan.
• Attorney Fees and Costs. If there is a dispute over the North Dakota promissory note, this clause explains how attorney fees and costs are handled.
• Waiver of Presentments. The lender isn’t legally required to be physically present when payments are made on the loan.
• Severability. A severability clause protects the validity of the rest of the promissory note if one part of it is found to be unenforceable.
• Conflicting Terms. The purpose of this clause is to explain how any conflicting terms in the note will be clarified.
• Notice. A notice clause informs the borrower whether they’ll be notified if the lender decides to sue for default.
• Governing Law. A governing law clause lists the state whose laws will be used to govern the promissory note and to resolve legal disputes.

There is no legal requirement to have a North Dakota promissory note notarized. The note must be signed and dated by the borrower. If there is a co-signer, they must also sign and date the agreement or they will not be responsible if the borrower defaults on the agreement.

A Sample North Dakota Promissory Note with Examples for Each Step

A North Dakota promissory note can be unsecured or secured. A secured promissory note should be titled as such ("North Dakota 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 North Dakota 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 North Dakota state law governing maximum interest/usury rates for written contracts, unless the parties agree, in writing, on an interest rate up to 5.5% higher than the average interest rate of U.S. Treasury bills), 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: 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 North Dakota 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 North Dakota, 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 North Dakota. 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 North Dakota

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org 

Bank of North Dakota               

University of North Dakota