Wisconsin Promissory Note: What Is It?
A Wisconsin promissory note is a written contract between a lender and a borrower. The note proves the existence of a loan and the promise the borrower makes to pay repay it. There are two types of promissory notes: secured and unsecured. A secured Wisconsin promissory note involves collateral. If the borrower defaults, the lender has the legal right to take a piece of collateral described in the promissory note. A common type of secured note is a loan for a vehicle. The borrower makes payments according to the agreement. If they default, the lender would repossess the vehicle to satisfy some or all of the balance. An unsecured promissory note does not involve collateral. The only assurance of payment is the signature of the borrower and any involved co-signer.
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 than 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.
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 a lot of 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 gives an explanation as to 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 with the exception of 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.
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