North Dakota Promissory Note: What Is It?
A North Dakota promissory note is a contract between a borrower and a lender that documents how a loan will be repaid. Promissory notes are secured or unsecured. When a promissory note is secured, the lender can retrieved a piece of collateral to repay some or all of the loan if the borrower defaults. An example is a car loan. If the borrower doesn’t pay as promised or if they don’t comply with the terms of the agreement, the lender has the legal right to retrieve the vehicle. An unsecured North Dakota promissory note only guarantees repayment with a signature. There is no collateral involved.
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. Firs, though, the document must be properly titled. 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 annual percentage rate (APR), per annum, or yearly interest rate.
- Payment agreement. This section explains how the loan will be repaid by the borrower. 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 on to the account should be documented here as well.
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.
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