Make a Oregon Promissory Note

A car loan is an example of a secured Oregon promissory note. If the borrower does not comply with the terms of the agreement, the lender has the legal right to take possession of the vehicle that is the subject of a loan. A title loan is another form of a secured promissory note. If the borrower does not pay as agreed, the lender can take possession of the vehicle for which they hold the title.

The parties in a promissory note are the lender and the borrower. However, a co-signer may also be a party to the agreement. If the borrower does not make their payments, a co-signer would be legally obligated to fulfill the terms of the contract.

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

The maximum amount of interest that may be charged in Oregon depends on the amount of the loan. Oregon’s usury law states that if a loan is for less than $50,000, the lender may charge no more than 12% interest or up to 5% over the Federal Reserve’s commercial paper discount rate. The Federal Reserve’s commercial paper discount rate is for a 90-day loan. If the loan is for more than $50,000, the parties may agree to any interest rate in writing. Without a written interest rate, the maximum rate is 9%.

How to Write an Oregon Promissory Notes

When writing an Oregon promissory note, it must be appropriately titled. Secured promissory notes must be titled as secured. Without the proper title, a court may hold that the terms of the agreement are unsecured. The lender could miss out on valuable collateral that could help them offset their loss. A secured promissory note title should include the word “secured.” For example, Secured Oregon Promissory Note. Following the title, certain basic information about the parties and the loan is used to create the body of the agreement:

• The date the Oregon promissory note was created. This date is placed below the title but before the parties are identified. It is written as month, day, and year. Along with the date the promissory note is signed, this date plays an important role if there is a legal dispute. The date could be used to help prove that the borrower owes the lender and that they are a party to the contract. The dates are also used to help establish legal deadlines related to when a lawsuit may be filed, how long the lender has to pursue collections and other related matters.
• Identify the parties and their roles in the agreement. The parties should be identified by their legal names as well as their role within the agreement. If there is a co-signer, they should be identified in this section. Lenders or borrowers may be individuals or they may be business entities. For example, Robert Paul Smith, Borrower and PDQ Auto Loans, Inc., Lender.
• The mailing address of each party. This is the full mailing address including city or town, state, and zip code. For secured Oregon promissory notes, document the physical address of the borrower and the co-signer if it is different from the mailing address. Lenders may have both a general contact mailing address and a payment processing mailing address. The payment processing address is best listed with the repayment agreement.
• The principal amount for the loan provided. This is the amount that the lender provided to the borrower. This amount does not include the money that will accrue as interest. Interest is addressed separately. This is the principal amount provided. This should be checked for accuracy before the promissory note is executed.
• The interest rate charged for the loan. This is the yearly interest rate charged for the loan. In Oregon, the interest rate is influenced by the amount of the loan. The amount of interest is often expressed as per annum, annual percentage rate (APR), or yearly interest rate.
• Payment agreement. This is a vital portion of the promissory note. It explains how the loan must be repaid by the borrower. This section lists the number of payments that must be made, when those payments are due, and the amount of each payment. If the lender charges a late fee, the amount of the fee should be mentioned in this section as well as when it is charged to the account. If the lender has a separate payment address, it should be listed in this section.

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For secured Oregon promissory notes, there should also be a description of the collateral. Without this description, a legal dispute could result in the note being treated as unsecured.

After the information about the parties and the loan, an Oregon promissory note will have clauses that are used to create the terms and conditions of the agreement. Some of the most basic clauses include:

• Interest Due in the Event of Default. If the borrower defaults on the promissory note in some way, they are often charged a higher interest rate than the initially documented rate. This clause lists the interest rate charged if there is a default.
• Payment Allocation. Payment allocation is an explanation of how the payments made by the borrower are split between the principal balance and the interest.
• Prepayment. Prepayment occurs if the borrower wants to pay off the loan before the end of the term stated under the payment agreement. A prepayment clause explains whether there is any sort of financial penalty assessed to the borrower for paying off the loan early.
• Acceleration. Acceleration is the lender’s legal right to demand full repayment for the outstanding balance immediately if the borrower defaults on the agreement.
• Attorney Fees and Costs. This clause is used to govern how attorney fees and costs that may be incurred by one or both parties will be handled.
• Waiver of Presentments. This clause states that there is no legal requirement for the lender to be physically present when the borrower makes payments.
• Severability. A severability clause is used to protect the remainder of the Oregon promissory note if one portion of it is found to be unenforceable.
• Conflicting Terms. A conflicting terms clause explains how any conflicting terms will be resolved.
• Notice. A notice clause explains whether the lender will provide notice to the borrower if the lender plans to file a lawsuit against them related to the promissory note.
• Governing Law. This clause documents the state whose laws will be used to mediate or litigate any dispute related to the promissory note.

There is no legal requirement for most Oregon promissory notes to be notarized. Promissory notes related to real estate loans may require notarization. Most promissory notes in Oregon need to be signed and dated by the borrower and any applicable co-signer.

Instructions to Create an Oregon Promissory Note

An Oregon promissory note can be unsecured or secured. A secured promissory note must be titled as such ("Secured Oregon 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 Oregon 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 Oregon state law governing maximum interest/usury rates for written contracts; if the loan is for more than $50,000, the parties may agree, in writing, on any rate of interest), 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 documents 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 Oregon 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 Oregon, most 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 most promissory notes to be witnessed or notarized in Oregon (promissory notes related to real estate may need to be notarized). 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 Oregon

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

State of Oregon Higher Education Coordinating Commission  

Oregon Community Credit Union   

Oregon Department of Justice   

Oregon Health and Science University