Hawaii Promissory Note
Hawaii promissory note template: 12% cap on consumer loans, no cap on most other loans under state law, 6-year SOL. Free template. Attorney review available.
Introduction
Hawaii does not set one interest-rate ceiling for a promissory note, it sets two, and for most ordinary private loans, it sets none at all. A written contract for a "consumer credit" loan (personal/family/household purpose, $250,000 or less, or secured by the borrower's home) or a "home business loan" secured by a mortgage on the borrower's home tops out at 12% per year, or 24% for a financial institution regulated under HRS chapter 412. Outside those categories, an ordinary family loan not secured by a house or a general business loan, HRS Section 478-4(c) lets the maker and payee agree in writing to any rate at all. Without a written rate, the default is 10% per year. A promissory note is a written, signed promise by one party, the maker, to pay a definite sum to another party, the payee, on demand or by a set date, and it's the paper trail that makes a loan enforceable if the maker doesn't pay. A Hawaii note doesn't need to be notarized or witnessed to be enforceable. Charging above the applicable cap isn't just a civil problem: usury is also a crime in Hawaii, punishable by a fine of up to $250 or up to a year in prison, on top of the lender forfeiting all interest. Hawaii's confession-of-judgment ban is narrow, reaching only credit sale contracts for goods, not general notes. 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
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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
Hawaii's usury cap depends on the type of loan, not just its size. A written contract for a "consumer credit" loan (personal, family, or household purpose, $250,000 or less, or secured by the borrower's home) or a "home business loan" (secured by a mortgage on the borrower's home) may not exceed 12% per year, or 24% per year if the lender is a financial institution regulated under HRS chapter 412. For any other loan, such as a family loan not secured by a house or a general business loan, Hawaii sets no statutory cap at all; without a written rate, the default rate is 10% per year. (HRS Sections 478-2, 478-4)
- 3
Charging more than the applicable cap carries both a civil and a criminal consequence. Civilly, the lender forfeits the right to collect any interest at all and can recover only the principal (HRS Section 478-5). Criminally, usury is a separate offense punishable by a fine of up to $250 or imprisonment of up to one year, or both (HRS Section 478-6).
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A Hawaii promissory note does not need to be notarized or witnessed to be enforceable. HRS Section 490:3-104 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 is not one of the requirements.
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Hawaii does not broadly ban confession-of-judgment (cognovit) clauses, which let the payee obtain a court judgment against the maker without a full lawsuit, in a general promissory note. HRS Section 476-15 voids such a clause only in a "credit sale contract" for goods, and Hawaii's own negotiable-instruments statute lists a confession-of-judgment authorization as a term that does not defeat a note's negotiability. (HRS Sections 476-15, 490:3-104)
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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 Hawaii. (HRS Section 657-1)
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If a Hawaii promissory note is secured by personal property, the lender generally needs to file a UCC-1 financing statement to protect its priority against other creditors. Hawaii has no secretary of state; UCC filings go to the Bureau of Conveyances, the state's single statewide recording office. (HRS Sections 490:9-310, 490:9-501)
Key decisions before you file
Before you file a Promissory Note in Hawaii, 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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Hawaii Requirements for Promissory Note
For a consumer credit loan or a home business loan, the maximum written-contract rate is 12% per annum, or 24% per annum if the lender is a financial institution regulated under Hawaii Revised Statutes chapter 412. For any other written-contract loan, no statutory cap applies. Without a written rate, the default statutory rate is 10% per annum (Hawaii Revised Statutes Section 478-2).
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
Hawaii has no secretary of state; a UCC-1 financing statement for a Hawaii transaction is filed with the Bureau of Conveyances, the state's single statewide recording office.
If a note is secured by personal property, the lender generally must file a UCC-1 financing statement to perfect and prioritize its security interest against other creditors.
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.
Hawaii does not require a promissory note to be notarized or witnessed to be enforceable. Hawaii Revised Statutes Section 490:3-104's list of what makes a note a valid negotiable instrument does not include notarization or witnessing; notarization is optional and used only for evidentiary purposes.
A lender who charges more than the applicable cap forfeits the right to collect any interest and may recover only the principal (Hawaii Revised Statutes Section 478-5). Usury is also a separate criminal offense punishable by a fine of up to $250 or imprisonment of up to one year, or both (Hawaii Revised Statutes Section 478-6).
Hawaii voids a confession-of-judgment clause only in a credit sale contract for goods; a general promissory note is not covered by that ban, though including such a clause waives significant procedural rights and warrants its own legal review.
Frequently Asked Questions
It depends on the loan. A written contract for a consumer credit loan (personal, family, or household purpose, $250,000 or less, or secured by the borrower's home) or a home business loan secured by a mortgage on the borrower's home may not exceed 12% per year, or 24% per year if the lender is a financial institution regulated under HRS chapter 412. For most other loans, such as a family loan not secured by a house or a general business loan, Hawaii sets no statutory cap. Without a written rate, the default statutory rate is 10% per year.
No. HRS Section 490:3-104 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, an interest rate that fits within whichever Hawaii usury category applies (consumer credit, home business loan, or uncapped), the repayment schedule, what counts as default, and the signatures of the maker and payee. Since Hawaii's confession-of-judgment ban only reaches credit sale contracts for goods, a general note may include one if both parties agree, though it's worth its own legal review given what it waives.
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 HRS Section 490:3-104: 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, the lender generally needs to file a UCC-1 financing statement to protect its priority against other creditors. Hawaii has no secretary of state; UCC filings are made with the Bureau of Conveyances, the state's single statewide recording office.
The payee can declare the remaining balance immediately due if the note includes an acceleration clause, and can sue to collect. If the note includes a confession-of-judgment clause and the maker agreed to it, the payee may also be able to seek judgment without a full lawsuit, since Hawaii's ban on that clause is limited to credit sale contracts for goods. Charging usurious interest in the first place also exposes the lender to losing all interest and, separately, to criminal usury charges.
Generally 6 years from a missed payment or the note's stated due date, under Hawaii's statute of limitations for actions on a debt founded on a contract (HRS Section 657-1). 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 Hawaii. Which usury category applies can change the analysis: a family loan not secured by the borrower's home is generally not "consumer credit" or a "home business loan," so it may fall into the category with no statutory rate cap, while a loan secured by the borrower's house is more likely to be capped at 12% or 24% per year.