DocDraft Logo

Indiana Promissory Note

Indiana promissory note template with the state's usury rules (commonly 25%) and 6-year statute of limitations. Free template. Attorney review available.

Introduction

Indiana does not stop at refusing to enforce a confession-of-judgment clause in a promissory note, it makes procuring one a crime. Knowingly getting someone to sign a cognovit note (a clause letting the payee obtain a court judgment without a lawsuit), or holding one as the payee, is a Class B misdemeanor, on top of the underlying agreement being void. That is a sharper stance than most states, where such a clause is typically just unenforceable rather than criminally punishable to hold. Indiana's rate rules for an ordinary private loan are commonly cited around 25% per year for a loan primarily for personal, family, or household purposes made by someone not regularly in the lending business, the classic family loan, with no state lender's license required. Charging roughly double a licensed lender's tier, commonly cited near 72% APR, is criminal loansharking, a felony that also voids the loan. Confirm the current statute (Indiana Code Section 24-4.5-3-602) before relying on the 25% figure. Absent a written rate, the default is 8% per year. A note doesn't need to be notarized or witnessed to be enforceable, and you generally have 6 years from a missed payment or the due date to sue to collect.

0/5000

Key Things to Know

  1. 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. 2

    For an ordinary private loan primarily for personal, family, or household purposes made by someone not regularly in the lending business, the interest rate is commonly cited as up to 25% per year without needing a state lender's license. Absent any written rate, Indiana's default rate is 8% per year. Confirm the current statute (Indiana Code Section 24-4.5-3-602) before relying on the 25% figure specifically. (Indiana Code Sections 24-4.5-3-602, 24-4.6-1-102)

  3. 3

    Indiana's Department of Financial Institutions describes a blended maximum finance charge of 36% or a flat 25%, whichever is greater, for general consumer loans, with a licensed "supervised lender" scale reaching 36% on the smallest balances. Charging more than roughly double that supervised-lender tier, commonly cited near 72% APR, is criminal loansharking, a felony that also voids the loan. (Indiana Code Section 35-45-7-2)

  4. 4

    An Indiana promissory note does not need to be notarized or witnessed to be enforceable. Indiana Code Section 26-1-3.1-104 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.

  5. 5

    Confession-of-judgment and cognovit-note clauses (a clause letting the payee get a court judgment without a lawsuit) are not just unenforceable in Indiana, they're criminally banned. An agreement to confess judgment entered before a cause of action accrues is void, and knowingly procuring, holding, or attempting to enforce a cognovit note is a Class B misdemeanor. (Indiana Code Sections 34-54-3-2, 34-54-3-3, 34-54-4-1)

  6. 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 Indiana. (Indiana Code Section 34-11-2-9)

  7. 7

    If an Indiana promissory note is secured by personal property, the lender generally needs to file a UCC-1 financing statement with the Indiana Secretary of State, Business Services Division, to protect its priority against other creditors. Promissory notes are commonly used in Indiana for family loans, small business loans, and LLC loans between members. (Indiana Code Section 26-1-9.1-310)

Key decisions before you file

Before you file a Promissory Note in Indiana, a few decisions shape the document: which option to choose and what each one means. The Promissory Note guide walks through them.

Open the Promissory Note guide

Customize your Promissory Note Template with DocDraft

INDIANA PROMISSORY NOTE

Principal Amount: $[PRINCIPAL AMOUNT] Date: [DATE] Location: [CITY], Indiana

1. PARTIES

Maker (Borrower): [MAKER'S FULL LEGAL NAME], of [MAKER'S ADDRESS]

Payee (Lender): [PAYEE'S FULL LEGAL NAME], of [PAYEE'S ADDRESS]

For value received, the Maker promises to pay to the order of the Payee the Principal Amount stated above, together with interest as set forth below.

2. PRINCIPAL AMOUNT

Principal: $[PRINCIPAL AMOUNT]

3. INTEREST RATE

Rate: [RATE]% per annum.

Indiana usury rules: for an ordinary private loan for personal, family, or household purposes made by a lender not regularly in the business of lending, the rate is commonly cited as up to 25% per annum, no license required (Indiana Code Section 24-4.5-3-602); confirm the current statute before finalizing this rate. Charging roughly double a licensed lender's tier, commonly cited near 72% APR, is criminal loansharking and voids this Note (Indiana Code Section 35-45-7-2). Absent a stated rate, Indiana's default rate is 8% per annum (Indiana Code Section 24-4.6-1-102).

4. REPAYMENT SCHEDULE

[SELECT ONE:]

  • Installments: $[PAYMENT AMOUNT] due on the [DAY] of each month, beginning [START DATE], until paid in full.
  • On demand: Payable in full upon written demand by the Payee.
  • Lump sum: The entire unpaid Principal and accrued interest are due in full on [MATURITY DATE].

5. LATE PAYMENT, DEFAULT, AND ACCELERATION

A payment not received within [NUMBER] days of its due date is late, and a late fee of $[AMOUNT] or [PERCENTAGE]% of the overdue payment may apply. Upon default, the Payee may declare the entire unpaid Principal and accrued interest immediately due and payable (acceleration). This Note does not include a confession-of-judgment or cognovit clause. Indiana makes knowingly procuring or holding one a Class B misdemeanor, and an agreement to confess judgment entered before a cause of action accrues is void (Indiana Code Sections 34-54-3-2, 34-54-3-3, 34-54-4-1); enforcement after a default requires the Payee to pursue a regular lawsuit.

6. PREPAYMENT

The Maker may prepay all or part of the Principal at any time without penalty, unless a prepayment penalty is separately negotiated and stated here: [PREPAYMENT TERMS, IF ANY].

7. GOVERNING LAW

This Note is governed by the laws of the State of Indiana. An action to collect on this Note must generally be brought within 6 years of a missed payment or this Note's due date (Indiana Code Section 34-11-2-9). If this Note is secured by personal property rather than real estate, the Payee should file a UCC-1 financing statement with the Indiana Secretary of State, Business Services Division, to protect its priority against other creditors (Indiana Code Section 26-1-9.1-310).

SIGNATURES

Maker Signature: _________________________ Printed Name: [MAKER'S FULL LEGAL NAME] Date: [DATE]

Notary Acknowledgment (optional; notarization is not required for this Note to be enforceable in Indiana, but may be added for evidentiary purposes): _________________________

Governed by Indiana Code Section 24-4.5-3-602 and Section 35-45-7-2 (usury and criminal loansharking rules) and Indiana Code Section 34-11-2-9 (statute of limitations). This is a template; consult the current statute or an attorney to confirm details for your situation, attorney review is available and optional. For the full national Promissory Note template, see the full Promissory Note template.

Indiana Requirements for Promissory Note

Notarization Not Required for Validity (Indiana Code Section 26-1-3.1-104)

Indiana does not require a promissory note to be notarized or witnessed to be enforceable. Indiana Code Section 26-1-3.1-104'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.

Maximum Legal Interest Rate (Indiana Code Section 24-4.5-3-602)

For an ordinary private loan primarily for personal, family, or household purposes made by a lender not regularly in the business of lending, the rate is commonly cited as up to 25% per year without a state lender's license. Confirm the current statute before relying on this figure.

Criminal Loansharking Threshold (Indiana Code Section 35-45-7-2)

Charging more than roughly double a DFI-licensed supervised lender's finance-charge tier, commonly cited near 72% APR, is criminal loansharking, a felony, and voids the loan.

Negotiable Instruments Law (Indiana Code Section 26-1-3.1-104)

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.

Statute of Limitations (Indiana Code Section 34-11-2-9)

Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note executed after August 31, 1982.

Confession of Judgment Banned (Indiana Code Section 34-54-3-2)

An agreement to confess judgment on a note entered before a cause of action accrues is void, and knowingly procuring, holding, or enforcing a cognovit note is a Class B misdemeanor under Indiana Code Section 34-54-4-1.

Consumer Related Loan Licensing Exemption (Indiana Code Section 24-4.5-3-602)

A private, occasional lender making a loan primarily for personal, family, or household purposes to an individual is a "consumer related loan" and does not need a Department of Financial Institutions lender's license, unlike a "supervised lender" who regularly makes loans and must be DFI-licensed.

Secured Transaction Filing (Indiana Code Section 26-1-9.1-310)

If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the Indiana Secretary of State, Business Services Division, to perfect and prioritize its security interest against other creditors.

Frequently Asked Questions

No. Indiana Code Section 26-1-3.1-104 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 within Indiana's usury rules, the repayment schedule, what counts as default, and the signatures of the maker and payee. Do not include a confession-of-judgment or cognovit clause: Indiana makes knowingly procuring or holding one a Class B misdemeanor, so the note 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 Indiana Code Section 26-1-3.1-104: 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 with the Indiana Secretary of State, Business Services Division, 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. Indiana criminally bans confession-of-judgment and cognovit-note clauses, so the payee cannot get a judgment without filing a lawsuit; knowingly procuring or holding a cognovit note is itself a Class B misdemeanor.

Generally 6 years from a missed payment or the note's stated due date, for a note executed after August 31, 1982, under Indiana Code Section 34-11-2-9. Waiting too long can mean losing the right to sue on the note.

Yes. Promissory notes are commonly used in Indiana for both family loans and business or LLC loans. Which interest-rate figure applies can differ depending on whether the loan is primarily for personal, family, or household purposes or for another purpose like funding a business, so confirm the current statute for your specific situation.