Iowa Promissory Note

Introduction

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

   Iowa does not fix the usury ceiling at one percentage. For a written agreement, the maximum lawful rate is 2 percentage points above the monthly average 10-year U.S. Treasury constant maturity rate, recalculated and published every month by the Iowa Superintendent of Banking (for example, 6.5% for August 2026). If no rate is agreed in writing, the default rate is 5% per year. (Iowa Code Section 535.2)

3. 3

   Several categories of loan are exempt from Iowa's usury ceiling entirely, meaning the parties can agree in writing to any rate: loans to buy real property, business or agricultural purpose loans, loans for real-property construction improvements above a statutory threshold, corporate borrowers, and personal or family loans above the federal "threshold amount" that Regulation Z adjusts annually. (Iowa Code Section 535.2, subsection 2)

4. 4

   An Iowa promissory note does not need to be notarized or witnessed to be enforceable. Iowa Code Section 554.3104 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. 5

   Confession-of-judgment clauses, which would let the payee obtain a court judgment against the maker without a full lawsuit, are legal in Iowa only after a default has already happened. Iowa Code Section 537.3306 voids a confession authorization signed before default on an ordinary loan, and Iowa Code Chapter 676 requires the maker to sign and verify a written statement, filed with the district court clerk, before the clerk enters judgment.

6. 6

   You generally have 10 years from a missed payment or the note's stated due date to sue to collect on a written promissory note in Iowa, longer than the limitations period in many other states. (Iowa Code Section 614.1, subsection 5)

7. 7

   If an Iowa promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement with the Iowa Secretary of State to protect its priority against other creditors. (Iowa Code Section 554.9310)

Iowa Requirements for Promissory Note

• Notarization Not Required for Validity (Iowa Code Section 554.3104)

  Iowa does not require a promissory note to be notarized or witnessed to be enforceable; notarization is optional and used only for evidentiary purposes.

• Maximum Legal Interest Rate (Iowa Code Section 535.2)

  for a written agreement, 2 percentage points above the monthly average 10-year U.S. Treasury constant maturity rate, recalculated and published monthly by the Iowa Superintendent of Banking; the default rate absent a written rate is 5% per annum. Several loan categories (business, agricultural, real-property-purchase, corporate borrowers, and personal/family loans above the federal Regulation Z threshold amount) are exempt from the ceiling entirely.

• Usury Penalty (Iowa Code Section 535.5)

  a lender who charges above the lawful rate forfeits 8% per annum on the unpaid principal at judgment, paid to the state treasurer, not the borrower; the lender's judgment is also capped at the principal sum if unlawful interest was charged.

• Negotiability Requirements (Iowa Code Section 554.3104)

  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 (Iowa Code Section 614.1, subsection 5)

  generally 10 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.

• Secured Transaction Filing (Iowa Code Section 554.9310)

  if a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the Iowa Secretary of State to perfect and prioritize its security interest.

• Confession of Judgment Procedure (Iowa Code Chapter 676; Iowa Code Section 537.3306)

  confession of judgment is legal in Iowa only after a default has already happened. Section 537.3306 voids a pre-default confession authorization on an ordinary loan, and Chapter 676 requires the defendant to sign and verify a written statement, filed with the district court clerk, before judgment is entered.

• Iowa Consumer Credit Code Scope (Iowa Code Section 537.1301)

  Chapter 537's licensing and disclosure rules apply only to a "consumer loan," a loan made by a lender regularly engaged in the business of lending, to a natural person, primarily for personal/family/household use, payable in installments or carrying a finance charge, and not exceeding the federal Regulation Z "threshold amount." An isolated private person-to-person note falls outside this scope.