Make a South Carolina Promissory Note

What Is the Maximum Interest Rate That May Be Charged in South Carolina?

The maximum interest rate that may be charged in South Carolina depends on whether the repayment agreement is in writing and the amount of the loan. If the promissory note is related to a consumer loan and the loan is for less than $25,000, the maximum amount of interest that may be charged is 12% per year.

If there is a written agreement (such as a promissory note), the parties can agree to any interest rate within the document. Just remember that personal loans for less than $25,000 have a maximum interest rate. If there is no written agreement or if interest is not addressed in the promissory note, the maximum amount of interest is then 8.75%.

How to Write a South Carolina Promissory Note

When writing a South Carolina promissory note, the first step is to title the document appropriately. Secured promissory notes should use the word “secured” in the title. This will help protect the lender and their legal rights if a lawsuit arises. After creating the proper title, you’ll use information about the parties and the loan to create the body of the agreement:

• Creation date for the South Carolina promissory note. This date is written as month, day, and year. It is placed directly below the title. This date, and the date that the borrower and any applicable cosigner execute the document, is very important. It helps show that the borrower willingly entered into the agreement to receive the loan and repay it. It also helps establish specific legal deadlines.
• Identify the parties to the agreement and the role that each party plays. Identify each party with their legal name and the role they play. This includes cosigners.
• Provide the full mailing address for each party. Include the city or town, state, and zip code. Make sure that the address listed for each party is accurate. For secured South Carolina promissory notes, the borrower and cosigner may have a physical address that is different from the mailing address. If this is the case, make sure to include the physical address. This can be very helpful in collecting collateral if it becomes necessary. Lenders may have a general mailing address and a payment processing address. The general mailing address should be listed here, and the payment processing address should be listed with the repayment information.
• The principal loan amount. This is the amount of money provided to the borrower without including the interest. Before the promissory note is executed, make sure that the dollar amount listed is accurate.
• The yearly interest charged for the loan. This is the interest rate charged by the lender. It is often documented as per annum or annual percentage rate. In South Carolina, the amount of interest that may be charged depends on the amount of the loan.
• Payment agreement. The payment agreement documents how the borrower will repay the loan that was provided. This section should include the total number of payments the borrower must make, the amount of each payment, and the due date for each payment. The payment address for the lender should be listed in this section. If a late fee is assessed for late payments, the amount of the fee as well as when it will be assessed should be documented here, too.

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If the South Carolina promissory note is secured, it should include a description of the collateral that the lender may collect if the borrower defaults on the agreement. Without this description, the lender’s right to collect collateral may not be upheld by the court.

After a recitation of the basic facts related to the relationship between the parties, clauses are used to create the terms and conditions of the contract. There are a lot of different clauses that may be used. Below is a list of the most commonly used clauses:

• Interest Due in the Event of Default. This is the interest rate charged if the borrower defaults on the agreement. It is higher than the agreed-upon interest, but it should not exceed the legal maximum.
• Payment Allocation. How the payments made on the loan are split between the principal balance and the interest.
• Prepayment. Whether the lender will assess a financial penalty against the borrower if the borrower pays off the loan before the end of the loan term.
• Acceleration. The lender’s legal right to demand immediate repayment of the outstanding balance if the borrower does not adhere to the terms of the agreement.
• Attorney Fees and Costs. How incurred attorney fees and costs by either or both parties will be handled if there is a legal dispute over the promissory note.
• Waiver of Presentments. There is no legal requirement for the lender to be physically present when the borrower makes payments.
• Severability. The rest of the South Carolina promissory note is protected and remains valid if one portion of it is found to be unenforceable.
• Conflicting Terms. How any conflicting terms in the promissory note will be resolved.
• Notice. Whether or not the borrower will be notified if the lender plans to file a lawsuit because of the promissory note.
• Governing Law. The state whose laws will be followed to mediate or litigate any dispute related to the note.

There is no legal requirement to have a South Carolina promissory note notarized. To execute the document, the borrower and any co-signer must sign and date the document.

A Sample South Carolina Promissory Note with Examples for Each Step

A South Carolina promissory note can be unsecured or secured. A secured promissory note should be titled as such; 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 South Carolina 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 South Carolina state law governing maximum interest/usury rates for written contracts relating to consumer/personal loans under $25,000; if the loan is for more than $25,000, the parties can agree on any interest rate in a written promissory note), 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 South Carolina 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 South Carolina, 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 South Carolina. 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 South Carolina

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

South Carolina Student Loan    

University of South Carolina