Colorado Promissory Note
Colorado promissory note template with the 45% usury cap and a 6-year statute of limitations under state law. Free template. Attorney review available.
Introduction
Colorado sets one of the most permissive general interest-rate ceilings in the country: the parties to a written promissory note may agree to any rate up to 45% per year, far above the 8% rate that applies by default when a note doesn't say what the rate is. Both numbers come from Colorado Revised Statutes Section 5-12-103 and Section 5-12-101, and they cover the ordinary private loan, whether it's between family members, friends, or a small business. A promissory note itself is a written, signed promise by one party, the maker, to pay a definite sum of money to another, the payee, either on demand or by a set date, and it's what makes an informal loan enforceable in court if the maker stops paying. A separate, much lower set of interest-rate caps applies only to a lender that's licensed and regularly engaged in the business of making consumer loans, generally 12% per year or a tiered structure up to 36%. That narrower cap doesn't reach an ordinary note between private parties. Colorado does not require a promissory note to be notarized or witnessed to be enforceable. A consumer credit transaction can't include an enforceable confession-of-judgment clause (a clause letting the payee get a court judgment without a lawsuit), and this template leaves one out. You generally have 6 years from a missed payment or the note's due date to sue to collect 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
The parties to a written Colorado promissory note may agree to any interest rate up to 45% per year. If the note doesn't state a rate, interest accrues at the default statutory rate of 8% per year, compounded annually. (Colo. Rev. Stat. Sections 5-12-101, 5-12-103) A separate, lower cap (generally 12% per year, or a tiered structure up to 36%) applies only to a "consumer loan" made by a lender licensed and regularly engaged in the business of lending, not to an ordinary loan between private individuals. (Colo. Rev. Stat. Section 5-2-201)
- 3
A Colorado promissory note does not need to be notarized or witnessed to be enforceable. Colorado Revised Statutes Section 4-3-104 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.
- 4
A confession-of-judgment clause (letting the payee get a court judgment against the maker without filing a lawsuit) is void if used to authorize judgment on a claim from a consumer credit transaction. (Colo. Rev. Stat. Section 5-3-207) Colorado does not have a general statute addressing such a clause outside a consumer credit transaction, so this template does not include one.
- 5
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 Colorado. (Colo. Rev. Stat. Section 13-80-103.5) If the note is payable on demand and the payee never makes a demand, an action to collect is barred once 10 years pass without any payment of principal or interest. (Colo. Rev. Stat. Section 4-3-118)
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If a Colorado promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement with the Colorado Secretary of State to protect its priority against other creditors. (Colo. Rev. Stat. Section 4-9-310)
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Promissory notes are commonly used in Colorado for both informal loans, such as a loan between family members or friends, and business or LLC loans, including capital contributions structured as debt rather than equity.
Key decisions before you file
Before you file a Promissory Note in Colorado, 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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Colorado Requirements for Promissory Note
The parties to a written note may agree to a rate up to 45% per annum; if no rate is stated, interest accrues at the default statutory rate of 8% per annum, compounded annually, under Colorado Revised Statutes Section 5-12-101.
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.
A note payable at a definite time must generally be enforced within 6 years of its due date. A note payable on demand must generally be enforced within 6 years of a demand for payment, but if no demand is ever made, an action is barred once 10 years pass without any payment of principal or interest.
A consumer may not authorize anyone to confess judgment on a claim arising out of a consumer credit transaction, and any such authorization is void. Colorado has no general statute addressing a confession-of-judgment clause outside a consumer credit transaction, so a basic promissory note should not include one.
If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the Colorado Secretary of State to perfect and prioritize its security interest against other creditors.
The Uniform Consumer Credit Code's lower finance-charge caps (generally 12% per year, or a tiered structure up to 36%) apply only to a "consumer loan" made by a lender regularly engaged in the business of making loans. An isolated private person-to-person promissory note does not trigger these caps.
Colorado does not require a promissory note to be notarized or witnessed to be enforceable. Section 4-3-104's list of what makes a note a valid negotiable instrument does not include notarization, and notarization is optional and used only for evidentiary purposes.
Frequently Asked Questions
The parties to a written Colorado promissory note may agree to any rate up to 45% per year. If the note doesn't state a rate, interest accrues at the default statutory rate of 8% per year, compounded annually. A separate, lower cap (generally 12% per year, or a tiered structure up to 36%) applies only to a lender licensed and regularly engaged in the business of consumer lending, not to an ordinary loan between private individuals.
No. Colorado Revised Statutes Section 4-3-104 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 (within Colorado's usury cap), the repayment schedule, what counts as default, and the signatures of the maker and payee. Since Colorado voids a confession-of-judgment authorization for a consumer credit transaction and has no general statute addressing one outside that context, it's safest to leave that clause out and rely 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 Colorado Revised Statutes Section 4-3-104: 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 Colorado 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. Colorado voids a consumer's authorization to confess judgment on a claim from a consumer credit transaction, so a payee generally can't get a judgment on that kind of debt without filing a lawsuit.
Generally 6 years from a missed payment or the note's stated due date, under Colorado's general statute of limitations for actions on a written instrument evidencing a debt. If the note is payable on demand and no demand is ever made, collection is barred once 10 years pass without any payment of principal or interest. Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used in Colorado for both family loans and business or LLC loans, including capital contributions structured as debt. The same 45% general usury ceiling and 8% default rate apply to an ordinary private loan either way; the lower, licensed-lender-only rate caps under the Colorado Uniform Consumer Credit Code don't apply to a private note between individuals or to a member's loan to their own LLC.