Make a West Virginia Promissory Note

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, plays an important role. 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 and 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

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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 a co-signer is mentioned as a party, the co-signer should also sign and date the note.

A Sample West Virginia Promissory Note with Examples for Each Step

A West Virginia 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 West Virginia 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 West Virginia state law governing maximum interest/usury rates for written contracts), 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 West Virginia 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 West Virginia, 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 West Virginia. 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 West Virginia

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

West Virginia Central Federal Credit Union

West Virginia University Robert C. Byrd Health Sciences Center Institute for Community and Rural Health