Oregon Promissory Note: What Is It?
An Oregon promissory note is a written contract between a lender and a borrower. It documents the existence of a loan provided to the borrower and also explains how the borrower will repay the loan. Oregon promissory notes may be secured or unsecured. When a promissory note is secured, the lender is promised collateral as payment for some or all of the remaining balance of the loan. With an unsecured promissory note, there is no collateral. The only guarantee the lender receives for repayment is the signature of the borrower. 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 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 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 properly 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.
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.
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