Make a Wisconsin Promissory Note

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

With a written agreement, the maximum amount of yearly interest that may be charged in Wisconsin is 12%. However, there are also exceptions to this. If there is no written agreement that addresses interest, the most interest that may be charged is 5% per year.

How to Write a Wisconsin Promissory Note

Choose the right title when writing a Wisconsin promissory note. A secured promissory note should use the word “secured” in the title. This helps protect the lender’s legal interests in the collateral described in the note. After the title, use information about the parties involved and the loan to write the main body of the agreement:

• The date the Wisconsin promissory note was written. This date is placed below the title. It is most often written as month, day, and year. This date shows when the borrower first received the loan and entered into the repayment agreement. It is also important to ensure that the borrower’s signature is dated. The date of the signature helps by validating the day the borrower entered into the agreement to repay. Both dates help create specific legal deadlines.
• The legal name of each party and their role in the contract. Use the legal name of each party, as well as their role. The roles in a Wisconsin promissory note are the lender, the borrower, and a co-signer. Not all notes involve a co-signer. Here’s an example of how this may appear: ABC Finance Company, LLC, Lender.
• The full mailing address for each party. It is important to include the city or town, state, and zip code for every party. If the promissory note is secured, include the physical address for the borrower (and co-signer, if there is one) if the physical address is different from the mailing address.
• The amount loaned to the borrower. This is referred to as the principal balance or principal loan amount. This is the amount of money loaned to the borrower. This amount does not include the interest the borrower will pay.
• The interest rate charged per year for the loan. For most Wisconsin promissory notes, this amount may not exceed 12%.
• Payment Agreement. This is how the borrower will repay the loan they received. This section lists the total number of installments that will be paid, the amount of each installment, and the due date for each installment. The amount of the late fee should also be listed here. If the lender has a specific payment processing address, that address should be placed here for easy reference.

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A secured Wisconsin promissory note should include a description of the collateral the lender is entitled to receive if the borrower does not pay. Without this information, a court may not allow the lender to take possession of the collateral.

After the main body of the promissory note, clauses are used to define the terms of the agreement. Because there are many clauses to choose from, we’ve put together this list of the most commonly used ones:

• Interest Due in the Event of Default. This clause lists the new interest rate the borrower will pay if they default on the agreement.
• Payment Allocation. This clause explains how received payments are split between the principal balance and the interest.
• Acceleration. This clause outlines the lender’s legal right to demand immediate repayment of the outstanding balance if the borrower defaults on the agreement.
• Prepayment. This clause states whether the lender will assess a financial penalty if the borrower pays off the loan in advance of the expected end date.
• Attorney Fees and Costs. This clause is important because it explains who will be responsible for the attorney fees and costs that arise over a legal dispute involving the promissory note.
• Waiver of Presentments. A clause that states the lender isn’t legally required to be present when payments are made.
• Severability. This clause helps protect the remainder of the Wisconsin promissory note if one portion of the agreement is unenforceable.
• Conflicting Terms. This clause explains how any conflicting terms that may be found within the agreement will be resolved.
• Notice. A notice clause states whether the borrower will be notified if the lender plans to sue them for default.
• Governing Law. This clause lists the state whose laws will be used to govern the agreement and any dispute over it.

There is no legal requirement to have a Wisconsin promissory note notarized except for notes involving real estate. To make the promissory note legally binding, the borrower must sign and date the agreement. If there is a co-signer, they should also sign and date the agreement.

A Sample Wisconsin Promissory Note with Examples for Each Step

A Wisconsin promissory note can be unsecured or secured. A secured promissory 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 Wisconsin 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 Wisconsin 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 Wisconsin 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 Wisconsin, 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 Wisconsin, except for promissory notes related to real estate which must be notarized. 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 Wisconsin

National Consumer Law Center

Credit Union National Association Guide to State Usury Laws                                                          

Help Center/Federal Student Aid      

CollegeScholarships.org

Wisconsin Department of Public Instruction (WI DPI)

Look Forward to Your Future

State of Wisconsin Higher Educational Aids Board (HEAB)     

Ron Johnson U.S. Senate  

Great Lakes                                                  

Wisconsin Department of Health Services