Michigan Promissory Note
Michigan promissory note template with the 7% usury cap and separate 25% criminal usury line under state law. Free template. Attorney review available.
Introduction
Michigan runs two separate usury lines that don't move together. A written note carries a civil cap of 7% per year (5% if the note doesn't state a rate at all) under Michigan Compiled Laws Section 438.31, but that cap is not the point where a lender risks prison. Cross 7% and the lender simply forfeits all interest, fees, and attorney fees on the loan (Section 438.32); only crossing a much higher line, 25% per year, turns the loan into criminal usury, punishable by up to 5 years in prison or a $10,000 fine (Section 438.41). A loan to a "business entity," including a sole proprietor who gives the lender a written sworn statement of business purpose, is exempt from the 7% cap entirely under Section 438.61. A promissory note itself is a written, signed promise by one party, the maker, to pay a definite sum of money to another party, the payee, on demand or by a set date; the template below turns Michigan's two-tier rate structure into an actual fillable note. A Michigan note doesn't need to be notarized or witnessed to be enforceable. Confession-of-judgment clauses sit in an unusually specific spot here: Michigan law lets a payee obtain judgment by confession, but only through a separate instrument, distinct from the note itself, filed with the court, so a clause baked into the note won't hold up on its own, and licensed small-consumer lenders can't take one at all. 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
Absent a written rate, Michigan interest defaults to 5% per year; the maker and payee may agree in writing to a rate up to 7% per year for an ordinary note. That 7% figure is a civil cap only, separate from a much higher criminal-usury line: knowingly charging more than 25% per year without legal authorization is a felony punishable by up to 5 years in prison or a $10,000 fine. (MCL 438.31, MCL 438.41)
- 3
A loan to a "business entity" (a corporation, partnership, trust, cooperative, association, or a natural person who gives the lender a written sworn statement of business purpose) is exempt from the 7% civil cap entirely. If the lender is a licensed financial institution, the parties can agree to any written rate; otherwise the rate is capped at the criminal-usury threshold. (MCL 438.61)
- 4
A Michigan promissory note does not need to be notarized or witnessed to be enforceable. Michigan Compiled Laws Section 440.3104 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
Confession-of-judgment clauses, letting the payee obtain a court judgment without filing a lawsuit, are permitted in Michigan, but only through a separate instrument distinct from the note itself, produced to the court and filed with the clerk; a clause written directly into the note does not satisfy this requirement. A licensed Regulatory Loan Act small-consumer lender is barred from taking one at all. (MCL 600.2906, MCL 493.12)
- 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 Michigan. (MCL 600.5807)
- 7
If a Michigan 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. (MCL 440.9310) Promissory notes are commonly used in Michigan for both informal loans, such as a family loan, and business loans, where the business-entity usury exemption often applies.
Key decisions before you file
Before you file a Promissory Note in Michigan, 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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Michigan Requirements for Promissory Note
Michigan does not require a promissory note to be notarized or witnessed to be enforceable. Compiled Laws Section 440.3104'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.
Absent a written rate, interest defaults to 5% per annum; with a written agreement, the cap is 7% per annum for an ordinary loan. Separately, charging more than 25% per annum without legal authorization is criminal usury, a felony punishable by up to 5 years imprisonment or a $10,000 fine, distinct from and much higher than the 7% civil cap.
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.
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.
A loan to a business entity (a corporation, trust, estate, partnership, cooperative, association, or a natural person providing a written sworn statement of business purpose) is exempt from the 7% civil usury cap entirely. The 7% cap applies to the general, non-exempt private loan, not to every Michigan loan.
A confession of judgment is permitted in Michigan only if the authority to confess judgment is in a separate instrument, distinct from the note or contract itself, produced to the court and filed with the clerk. A licensed Regulatory Loan Act lender cannot take a confession of judgment or power of attorney to confess judgment at all (MCL 493.12).
Regulatory Loan Act licensing requirements apply only to a person engaged in the business of making loans of money, credit, goods, or things in action. An isolated private person-to-person promissory note does not trigger these requirements.
Frequently Asked Questions
Absent a written rate, Michigan interest defaults to 5% per year. If the note states a rate in writing, the maker and payee may agree to up to 7% per year for an ordinary loan. That 7% figure is only a civil cap: separately, knowingly charging more than 25% per year without legal authorization is criminal usury, a felony punishable by up to 5 years in prison or a $10,000 fine. A loan to a business entity is exempt from the 7% cap entirely.
No. Michigan Compiled Laws Section 440.3104 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 Michigan's 7% civil usury cap, unless the loan qualifies for the business-entity exemption), the repayment schedule, what counts as default, and the signatures of the maker and payee. Leave out a confession-of-judgment clause: Michigan only recognizes one if it's a separate instrument distinct from the note, filed with the court, so a clause written into the note itself doesn't hold up.
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 Michigan Compiled Laws Section 440.3104: 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.
The payee can declare the remaining balance immediately due (if the note includes an acceleration clause) and can sue to collect. Michigan does let a payee confess judgment against a defaulting maker, but only through a separate instrument filed with the court, distinct from the note; without that separate instrument, the payee has to pursue a regular lawsuit.
Generally 6 years from a missed payment or the note's stated due date, under Michigan's statute of limitations for an action on a written contract (MCL 600.5807). Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used in Michigan for both family loans and business or LLC loans. The applicable rate rule differs though: a family loan is generally subject to the 7% civil usury cap (5% if no rate is stated), while a loan to an LLC or other business entity that provides a written sworn statement of its business purpose is exempt from that cap under Michigan's business-entity usury exemption.