Make a Utah Promissory Note

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

In Utah, the maximum interest rate depends on whether the repayment agreement is in writing. If it is, such as with a promissory note, and the written document addresses interest, the parties may agree to any interest rate. If there is not a written agreement or if interest is not addressed, the maximum amount of interest that may be charged in Utah is 10% per year. The state statute sets out some exceptions to this.

How to Write a Utah Promissory Note

Writing a Utah promissory note starts by choosing the proper title. Secured Utah promissory notes must use the word “secured” in the title. This helps protect the lender’s legal interest in the named collateral. If a secured note does not use the word “secured,” a court may hold that the note is not to be treated as secured. After the title, certain information about the parties and the loan are used to memorialize the existence of the loan:

• The date the Utah promissory note was created. This date is placed beneath the title of the note. The most common format for this date is the month, day, and year. Another important date is the date of the signature to execute the agreement. This date, as well as the date the note was created, helps show that the borrower entered into an agreement to repay a loan. It also helps to set certain legal deadlines.
• The name of each party and its role in the agreement. To identify the parties, use their legal name. After the legal name, list the role this person or entity holds within the agreement. This includes lenders, borrowers, and co-signers.
• The mailing address for each named party. It is important to remember to list the city or town, state, and zip code for each mailing address. If the promissory note is secured, list the physical address for the borrower (and any co-signer) if it is different from their mailing address. Lenders often have more than one mailing address. This section lists the general mailing address. If there is a separate payment processing address, it should be documented in the payment agreement.
• The principal amount of the loan. This is the amount loaned to the borrower without the interest charged. Before a Utah promissory note is executed, make sure this number is accurate.
• The interest rate charged per year. This is the amount of interest charged each year on the loan. It is expressed as per annum or annual percentage rate (APR). In Utah, the parties may agree to any interest rate as long as that rate is in writing.
• Payment agreement. This section explains the total number of payments that must be made, the due date for each payment, and the amount of each payment. The late fee amount should be listed as well as when it is assessed. The payment processing address should be listed in this section, too.

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For secured Utah promissory notes, include a section that provides an accurate description of the collateral. Failure to include a description of the collateral may result in the note being treated by the court as unsecured.

After the main agreement is created, there are certain clauses that provide the terms and conditions. There are a lot of clauses to choose from. The most common ones are:

• Interest Due In the Event of Default. This interest rate is what the borrower will pay if they default on the agreement.
• Payment Allocation. This clause documents how the payments received are split between the principal loan and the interest.
• Acceleration. An explanation of the lender’s legal right to demand immediate payment of the remaining amount owed if the borrower does not comply with the terms of the loan.
• Prepayment. An explanation of whether the borrower will pay a financial penalty for paying off the loan early.
• Attorney Fees and Costs. A clause that explains how any attorney fees and costs incurred by one or both parties to the agreement will be handled if the fees and costs relate to the Utah promissory note in some way.
• Waiver of Presentments. A clause that states the lender isn’t required to be physically present at the time payments are made.
• Severability. A way to protect the remainder of the promissory note if one portion of it is found to be invalid.
• Conflicting Terms. A clause that documents how any conflicting terms will be clarified.
• Notice. An explanation as to whether the lender will notify the borrower if they plan to sue for default.
• Governing Law. A clause that documents the name of the state whose laws will be followed if an agreement arises over the Utah promissory note.

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

A Sample Utah Promissory Note with Examples for Each Step

A Utah 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 Utah 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 (in Utah, the parties to a written promissory note may agree, in writing, to any interest rate), 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 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 provides 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 Utah 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 Utah, 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 Utah. 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 Utah

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

Utah Higher Education Assistance Authority (UHEAA)    

CornerStone                                     

Complete Student Loans         

Utah Labor Commission   

The University of Utah