Arizona Promissory Note
Arizona promissory note template: no statutory cap on interest for written loans, 6-year statute of limitations. Free template. Attorney review available.
Introduction
Arizona sets no interest-rate ceiling at all once a loan is put in writing: if the maker and payee sign a written agreement, they may agree to any rate of interest, with no statutory maximum. That's a real departure from states that cap even written-contract interest by law. The relaxed rule has real teeth around its edges, though. If there's no written rate agreement, the default rate is 10% per year, and separately, a person who knowingly makes loans, or finances the business of making loans, at a rate higher than authorized by law commits usury, a class 1 misdemeanor, on top of a civil penalty that forfeits all interest collected above the lawful rate. A promissory note itself is a written, signed promise by one party, the maker, to pay a definite sum of money to another party, the payee, either on demand or by a set date, and it's what makes a family loan, a small business loan, or a loan between friends enforceable if the maker doesn't pay. An Arizona note doesn't need to be notarized or witnessed to be enforceable. Confession-of-judgment clauses aren't banned outright, but Arizona restricts them: a power of attorney to confess judgment on a note is only valid if it's signed after the debt becomes due, so a cognovit clause built into the note at signing won't hold up on its own. You generally have 6 years from a missed payment or the note's due date to sue on a written note.
Key Things to Know
- 1
A promissory note is a written, signed promise by one party (the maker) to pay a definite sum of money to another party (the payee), either on demand or by a set date.
- 2
Arizona does not cap the interest rate on a loan once the rate is set out in a written contract; the parties "may agree to any rate of interest." If there's no written rate agreement, the default statutory rate is 10% per year. (A.R.S. Section 44-1201)
- 3
Charging interest above the maximum permitted by law carries two separate consequences: civilly, the lender forfeits all interest and any judgment on the debt is limited to the unpaid principal; criminally, a person who knowingly makes, or finances the business of making, loans above the authorized rate commits usury, a class 1 misdemeanor. (A.R.S. Sections 44-1202, 44-1203, 13-2208)
- 4
An Arizona promissory note does not need to be notarized or witnessed to be enforceable. A.R.S. Section 47-3104 lists what makes a note a valid negotiable instrument (an unconditional promise, a fixed amount, a signature, payable on demand or by a definite date), and notarization isn't one of the requirements.
- 5
Confession-of-judgment (cognovit) clauses are not banned in Arizona, but they are restricted: a power of attorney authorizing a court to confess judgment on a note is valid only if it's executed after the debt becomes due, so a clause included in the note at the time of signing generally cannot, by itself, be used to obtain judgment without a lawsuit. (A.R.S. Section 44-143)
- 6
You generally have 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note in Arizona. (A.R.S. Section 12-548)
- 7
If an Arizona promissory note is secured by personal property rather than real property, the lender generally needs to file a financing statement (UCC-1) with the Arizona Secretary of State to perfect its priority against other creditors. (A.R.S. Section 47-9310)
Key decisions before you file
Before you file a Promissory Note in Arizona, a few decisions shape the document: which option to choose and what each one means. The Promissory Note guide walks through them.
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Arizona Requirements for Promissory Note
Arizona sets no statutory cap on the interest rate once a loan is set out in a written contract; the parties may agree to any rate. If there is no written rate agreement, the default statutory rate is 10% per annum.
Civilly, a lender who contracts for, reserves, or receives interest above the maximum permitted by law forfeits all interest, and any judgment on the debt is limited to the unpaid principal. Criminally, knowingly making, or financing the business of making, loans above the authorized rate is usury, a class 1 misdemeanor.
To be a valid negotiable instrument, a note must be an unconditional promise to pay a fixed amount, signed by the maker, and payable on demand or at a definite time.
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note executed in Arizona.
A power of attorney to confess judgment on a note is valid only if executed after the debt becomes due and payable. A confession-of-judgment or cognovit clause signed together with the note at origination does not, by itself, support a valid confession of judgment.
A consumer lender license is generally required only of a person "regularly engaged in the business" of consumer lending, meaning advertising or soliciting loans in Arizona, or making three or more consumer loans in a calendar year to Arizona residents. An isolated private person-to-person promissory note does not, by itself, trigger this licensing chapter.
If a note is secured by personal property, the lender generally must file a financing statement (UCC-1) with the Arizona Secretary of State to perfect and prioritize its security interest against other creditors.
Arizona does not require a promissory note to be notarized or witnessed to be enforceable. The negotiable-instrument requirements in Section 47-3104 do not include notarization or witnessing; notarization is optional and used only for evidentiary purposes.
Frequently Asked Questions
Arizona does not set a maximum interest rate for a loan documented in a written contract; the maker and payee may agree to any rate of interest. If there's no written rate agreement, the default statutory rate is 10% per year. Charging more than the maximum permitted by law outside a written-contract rate agreement can lead to forfeiture of all interest in a civil action and, for a person in the business of lending, a class 1 misdemeanor for usury.
No. Arizona Revised Statutes Section 47-3104 lists what makes a note a valid, enforceable negotiable instrument, and notarization isn't one of the requirements. Notarizing a note is optional and can help as evidence of who signed it, but it doesn't affect enforceability.
Include the principal amount, the interest rate (any rate is enforceable once it's set out in writing, or 10% by default if the note is silent), the repayment schedule, what counts as default, and the signatures of the maker and payee. Because a power of attorney to confess judgment on a note isn't valid unless it's signed after the debt becomes due, don't rely on a cognovit clause signed at origination; the note generally relies on a regular lawsuit for enforcement if the maker defaults.
Yes, as long as it meets the basic requirements of a valid contract and, if it's meant to be a negotiable instrument, the elements in Arizona Revised Statutes Section 47-3104: an unconditional promise to pay a fixed amount, a signature, and payment on demand or by a definite date. It doesn't need to be notarized to be enforceable.
An unsecured note relies only on the maker's promise to pay. A secured note is backed by collateral, and if it's secured by personal property rather than real estate, the lender generally needs to file a UCC-1 financing statement with the Arizona Secretary of State to protect its priority against other creditors.
The payee can declare the remaining balance immediately due (if the note includes an acceleration clause) and can sue to collect. Arizona doesn't ban confession-of-judgment clauses outright, but a power of attorney to confess judgment on a note only works if it's signed after the debt becomes due, so a clause included in the note at signing generally won't let the payee skip straight to a judgment; a regular lawsuit is usually required.
Generally 6 years from a missed payment or the note's stated due date, under Arizona's statute of limitations for a debt founded on a written contract executed in the state (Arizona Revised Statutes Section 12-548). Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used for both family loans and business or LLC loans in Arizona. The same interest-rate rule and other requirements generally apply. A consumer lender license under Arizona Revised Statutes Title 6, Chapter 5 is generally only required of someone regularly engaged in the business of lending (advertising or soliciting loans in the state, or making three or more consumer loans a year), not for an isolated private loan like a typical family or LLC note.