West Virginia Promissory Note: What Is It?
A West Virginia promissory note is a contract between a lender and a borrower that documents the existence of a loan and the promise to repay it. Promissory notes may be secured or unsecured. An example of a secured promissory note is a vehicle loan. If the borrower doesn’t comply with the agreement, the lender can repossess the vehicle. The vehicle acts as collateral. An unsecured promissory note does not involve collateral. The only assurance the lender has for repayment is the signature of the borrower.
What Is the Maximum Amount of Interest That May Be Charged in West Virginia?
The maximum interest rate for a written agreement such as a promissory note is 8%. If interest isn’t addressed or if there is no written agreement, the maximum interest rate in West Virginia is 6%.
How to Write a West Virginia Promissory Note
When writing a West Virginia promissory note, it’s imperative to use the correct title. If a lender intends to create a secured note, the word “secured” should be used in the title. This will help protect the lender’s interest in receiving collateral if the borrower defaults. Without the proper title, a court may determine that the agreement is unsecured as opposed to secured.
Next, certain information about the parties and the loan will be used to draft the body of the promissory note:
- The date the promissory note is written. The date is placed below the title. The most common way the date is written is month, day, and year. This date, along with the date the borrower signs the note, play important roles. First, it helps show that the borrower acknowledges the loan and that it needs to be repaid. Second, it helps determine specific legal deadlines for certain legal actions.
- The legal name and the role of each party. Identify each party with their legal name and their role, including the co-signer. For example, Chad Alexander Smith, Co-signer.
- The mailing address for each party. It’s important to check the mailing addresses for accuracy as well as to include the city or town, state, and zip code. Also, if the promissory note is secured, include the physical address for the borrower (and co-signer) if it is different from the mailing address.
- The principal amount loaned to the borrower. This is the amount of the loan without including the interest. Before the borrower signs the note, it is important to make sure that this amount is accurate.
- The yearly interest rate. This is the amount of interest charged yearly on the loan. It is expressed as a percentage. For written documents, it may not be more than 8%.
- Payment agreement. This is information about how the borrower will repay the loan. It includes the total number of payments that must be made, the amount of each payment, and the due date for each payment. If there is a late fee, the amount should be listed. If the lender has a separate mailing address for payments, that address should be listed in this section
Secured West Virginia promissory notes must include a description of the collateral that the lender is entitled to receive if the borrower defaults. Failure to include this description could mean that the court treats the agreement as unsecured.
After the main contract, clauses are used to create the terms and conditions of the loan. The most commonly used clauses in West Virginia promissory notes are:
- Interest Due in the Event of Default. This is the interest rate that the borrower will pay if they default on the loan agreement.
- Payment Allocation. An explanation of how payments made on the loan will be split between the principal balance and the interest.
- Acceleration. An explanation of the lender’s legal right to demand immediate and full repayment of the outstanding balance if the borrower fails to comply with the terms of the agreement.
- Prepayment. Whether the lender will assess a financial penalty on the borrower if the borrower pays the loan off early.
- Attorney Fees and Costs. If either or both parties incur attorney fees and costs because of the promissory note, this clause explains who is responsible for those expenses.
- Waiver of Presentments. The borrower is still legally obligated to make their payments even if the lender isn’t physically present at the time payments are made.
- Severability. A severability clause helps protect the remainder of the West Virginia promissory note if one section of it is found to be invalid as a matter of law.
- Conflicting Terms. An explanation of how conflicting terms will be clarified if any are found within the agreement.
- Notice. This clause informs the borrower if they will be notified if the lender is suing them for default.
- Governing Law. The state whose laws will be used to govern the agreement and any legal disagreement related to it.
There is no legal requirement to have a West Virginia promissory note signed in front of the notary. To properly execute the note, it must be signed and dated by the borrower. If there is a co-signer mentioned as a party, the co-signer should also sign and date the note.
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