South Carolina Promissory Note: What Is It?
A South Carolina promissory note is a written contract where the borrower promises to repay the lender for a loan that was made. There are two types of promissory notes: secured and unsecured. When a promissory note is secured, the lender has the legal right to collateral if the borrower doesn’t follow the terms of repayment. An unsecured promissory note is basically a signature loan that does not involve collateral.
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 properly title the document. 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.
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.
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