Kentucky Promissory Note
Kentucky promissory note template within the state's $15,000 usury threshold and 10-year statute of limitations. Free template. Attorney review available.
Introduction
In Kentucky, a single number decides how high a private loan's interest rate can climb: $15,000. On a written note for $15,000 in principal or less, the maker and payee may agree to a rate up to the lesser of 19% per year or 4 percentage points over the Federal Reserve Bank's discount rate on 90-day commercial paper; without a written rate, the default is 8% per year. Push the principal past $15,000, and Kentucky removes the cap entirely, letting the parties agree to any rate. A promissory note is the written, signed promise that makes a loan enforceable, made by one party, the maker, to pay a definite sum to another, the payee, on demand or by a set date, the paper trail behind a family loan or a small business loan. A Kentucky note doesn't need to be notarized or witnessed to be enforceable. Kentucky voids a confession-of-judgment clause, letting a payee get a court judgment without a lawsuit, if signed before a dispute exists, the form ordinarily built into a note at signing; a confession of judgment is valid only if made in person, in court, after a lawsuit could already be filed. You generally have 10 years from a missed payment or the note's due date to sue on a written note signed today, though a note signed on or before July 15, 2014 falls under a 15-year window instead.
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
Kentucky's usury cap turns on a single $15,000 threshold. For a written note of $15,000 in original principal or less, the parties may agree to a rate up to the lesser of 19% per annum or 4 percentage points over the Federal Reserve Bank's discount rate on 90-day commercial paper; without a written rate, the legal default is 8% per annum. Above $15,000, Kentucky sets no statutory cap at all. Knowingly charging more than the applicable cap forfeits the entire interest, and if the excess was already paid, the borrower may recover double the interest paid, in an action commenced within 2 years of the usurious transaction. (Kentucky Revised Statutes Section 360.010; Section 360.020)
- 3
A Kentucky promissory note does not need to be notarized or witnessed to be enforceable. Kentucky Revised Statutes Section 355.3-104 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, a power of attorney letting the payee obtain a court judgment against the maker without a full lawsuit, is void in Kentucky if signed before an action is instituted, which is the form ordinarily included in a note at signing. A confession of judgment is valid only if the maker personally appears in court, with the assent of a party who already has a cause of action against them. (Kentucky Revised Statutes Section 372.140; Section 454.090)
- 5
For a written note executed today, you generally have 10 years from a missed payment or the note's stated due date to sue to collect. A note executed on or before July 15, 2014 instead falls under a 15-year window. (Kentucky Revised Statutes Section 413.160; Section 413.090)
- 6
If a Kentucky promissory note is secured by personal property rather than real property, the lender generally needs to file a financing statement (UCC-1), typically with the Kentucky Secretary of State, to protect its priority against other creditors. (Kentucky Revised Statutes Section 355.9-310)
- 7
Promissory notes are commonly used in Kentucky for family loans, business loans, and LLC loans. The same $15,000 threshold that shapes the usury cap also marks when a lender needs a Consumer Loan Company license from the Department of Financial Institutions to charge more than the otherwise-permitted rate; an occasional private loan between family or friends isn't "in the business of" lending and doesn't trigger that licensing requirement. (Kentucky Revised Statutes Section 286.4-420)
Key decisions before you file
Before you file a Promissory Note in Kentucky, 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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Kentucky Requirements for Promissory Note
8% per annum by default; for a written contract of $15,000 in original principal or less, up to the lesser of 19% per annum or 4% per annum over the Federal Reserve Bank's discount rate on 90-day commercial paper; for a written contract over $15,000 in original principal, no statutory cap applies.
knowingly charging more than the applicable cap forfeits the entire interest on the note; if the excess interest was already paid, the payer may recover double the amount paid, in an action commenced within 2 years of the usurious transaction.
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 10 years from a missed payment or the note's stated due date for a note executed after July 15, 2014; 15 years for a note executed on or before that date.
any power of attorney to confess judgment signed before a lawsuit exists is void; a confession of judgment is valid only through the maker's own in-person appearance in court after a cause of action already exists (Kentucky Revised Statutes Section 454.090).
if a note is secured by personal property, the lender generally must file a financing statement (UCC-1), typically with the Kentucky Secretary of State, to perfect and prioritize its security interest.
a license from the Commissioner of the Department of Financial Institutions is required only for a person engaged in the business of making loans of $15,000 or less at a rate above the otherwise-permitted rate; an isolated private person-to-person promissory note does not trigger this requirement.
Kentucky does not require a promissory note to be notarized or witnessed to be enforceable; notarization is optional and used only for evidentiary purposes.
Frequently Asked Questions
On a written note for $15,000 in principal or less, Kentucky lets the maker and payee agree to a rate up to the lesser of 19% per year or 4 percentage points over the Federal Reserve Bank's discount rate on 90-day commercial paper; without a written rate, the legal default is 8% per year. Once the principal passes $15,000, Kentucky sets no cap at all, and the parties can agree to any rate. Knowingly charging more than the applicable cap forfeits the lender's entire interest on the note.
No. Kentucky Revised Statutes Section 355.3-104 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 within Kentucky's threshold-based usury cap, the repayment schedule, what counts as default, and the signatures of the maker and payee. Since a confession-of-judgment clause signed before a dispute exists is void in Kentucky, don't include one; 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 Kentucky Revised Statutes Section 355.3-104: 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 financing statement (UCC-1), typically with the Kentucky 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. A pre-dispute confession-of-judgment clause is void in Kentucky, so the payee cannot rely on one; after a lawsuit exists, a confession of judgment is possible only if the maker personally appears in court and assents to it.
Generally 10 years from a missed payment or the note's stated due date, for a note executed after July 15, 2014. A note executed on or before July 15, 2014 instead falls under a 15-year window. Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used in Kentucky for both family loans and business or LLC loans. The same $15,000 threshold that shapes the usury cap also marks when a lender needs a Consumer Loan Company license to charge more than the otherwise-permitted rate; an occasional private loan between family members or LLC members generally isn't "in the business of" lending and doesn't trigger that licensing requirement.