New York Promissory Note
New York promissory note template with the 16% usury cap and the 6-year statute of limitations under state law. Free template. Attorney review available.
Introduction
New York's usury rules turn on the size of the loan as much as its purpose. Under $250,000, a written note is capped at 16% per year (New York Banking Law Section 14-a, referenced by General Obligations Law Section 5-501); charge more and the note is void. Cross $250,000, and, so long as the loan isn't secured mainly by a one- or two-family home, the civil cap disappears entirely, though a separate criminal-usury line stays in place: charging more than 25% per year is a class E felony under Penal Law Section 190.40. Cross $2,500,000 and even that criminal line falls away. New York also bars a corporate borrower from raising civil usury as a defense at all, in nearly every circumstance, regardless of loan size, under General Obligations Law Section 5-521, though a corporation can still claim criminal usury above 25%. A promissory note is what fixes where a given loan sits inside this structure, 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 these tiers into an actual fillable note. A New York note does not need to be notarized or witnessed to be enforceable. Confession-of-judgment clauses aren't banned outright, but since August 30, 2019 they only work against a maker who actually resides, or, for a business, has a place of business, in New York; an out-of-state maker can't be hit with one. You generally have 6 years from a missed payment or the note's due date to sue to collect, though a shorter 3-year period applies instead if the note is a consumer credit transaction.
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
New York caps interest on a written note under $250,000 at 16% per year (New York Banking Law Section 14-a; General Obligations Law Section 5-501); the default rate absent a written rate is 6% per year. A loan of $250,000 or more (other than one secured mainly by a one- or two-family residence) is exempt from that civil cap, though charging more than 25% per year is still criminal usury, a felony (Penal Law Section 190.40). A loan of $2,500,000 or more is exempt from both the civil and the criminal usury rules.
- 3
A corporation generally cannot raise civil usury as a defense to a loan at all, at any size, under General Obligations Law Section 5-521, with a narrow exception for a corporation whose main asset is a one- or two-family dwelling acquired shortly before the loan. A corporation can still raise criminal usury (a rate over 25% per year) as a defense.
- 4
A New York promissory note does not need to be notarized or witnessed to be enforceable. New York's Uniform Commercial Code Section 3-104 lists what makes a note a valid negotiable instrument, an unconditional promise to pay a sum certain in money, signed by the maker, payable on demand or at a definite time, and payable to order or bearer, and notarization isn't one of the requirements.
- 5
Confession-of-judgment clauses, letting the payee obtain a court judgment against the maker without a full lawsuit, are allowed in New York but restricted since August 30, 2019: the clerk cannot enter judgment against a maker who did not reside, or, for a business, did not have a place of business, in New York when the clause was signed or when the confession is filed. (New York Civil Practice Law and Rules Section 3218)
- 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 New York. (New York Civil Practice Law and Rules Section 213) If the note is a consumer credit transaction, a shorter 3-year period applies instead, and once it runs out, a later partial payment or acknowledgment of the debt does not restart it. (New York Civil Practice Law and Rules Section 214-i)
- 7
If a New York promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement with the New York Department of State to protect its priority against other creditors. (New York Uniform Commercial Code Section 9-310) Promissory notes are commonly used in New York for both family loans and business or LLC loans, and a lender who is engaged in the business of making loans of $25,000 or less to individuals (or $50,000 or less for a business loan) at an above-market rate generally needs a Licensed Lender license, though an isolated private note does not trigger that requirement. (New York Banking Law Section 340)
Key decisions before you file
Before you file a Promissory Note in New York, 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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New York Requirements for Promissory Note
For a written loan under $250,000, the maximum is 16% per annum (New York Banking Law Section 14-a; New York General Obligations Law Section 5-501). A loan of $250,000 or more (other than one secured mainly by a one- or two-family residence) is exempt from that civil cap, though a rate above 25% per annum remains criminal usury (New York Penal Law Section 190.40) unless the loan is $2,500,000 or more, which is exempt from both.
To be a valid negotiable instrument, a note must be an unconditional promise to pay a sum certain in money, signed by the maker, payable on demand or at a definite time, and payable to order or bearer.
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note (New York Civil Practice Law and Rules Section 213). A 3-year period applies instead to a consumer credit transaction (Section 214-i), and it is not revived by a later partial payment or acknowledgment of the debt.
A corporation generally cannot raise civil usury as a defense to a loan at any size, with a narrow exception for a corporation whose main asset is a one- or two-family dwelling acquired shortly before the loan. A corporation can still raise criminal usury (a rate over 25% per annum) as a defense.
Confession-of-judgment clauses are permitted but restricted: since August 30, 2019, the clerk cannot enter judgment against a maker who did not reside, or, for a business, did not have a place of business, in New York when the clause was signed and when the confession is filed.
If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the New York Department of State to perfect and prioritize its security interest against other creditors.
Licensed Lender licensing (New York Banking Law Section 340) applies only to a person or entity engaged in the business of making loans of $25,000 or less to individuals, or $50,000 or less for a business loan, at an above-market rate. An isolated private person-to-person promissory note does not trigger this requirement.
New York does not require a promissory note to be notarized or witnessed to be enforceable. Uniform Commercial Code Section 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.
Frequently Asked Questions
For a written loan under $250,000, New York caps interest at 16% per year (New York Banking Law Section 14-a). A loan of $250,000 or more, other than one secured mainly by a one- or two-family residence, is exempt from that civil cap, though charging more than 25% per year is still criminal usury, a felony, unless the loan is $2,500,000 or more, which is exempt from both the civil and the criminal usury rules.
No. New York's Uniform Commercial Code Section 3-104 lists what makes a note a valid, enforceable negotiable instrument, an unconditional promise to pay a sum certain in money, a signature, and payment on demand or at a definite time, 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 New York's usury tiers), the repayment schedule, what counts as default, and the signatures of the maker and payee. A confession-of-judgment clause can be included, but only if the maker actually resides, or has a place of business, in New York; otherwise leave it out, since it won't be enforceable against an out-of-state maker.
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 Uniform Commercial Code Section 3-104: an unconditional promise to pay a sum certain in money, a signature, and payment on demand or at a definite time. 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 UCC-1 financing statement with the New York Department 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. If the note includes an enforceable confession-of-judgment clause, meaning the maker resided or had a place of business in New York when the clause was signed and when it's filed, the payee can also obtain a judgment through that clause without a full lawsuit.
Generally 6 years from a missed payment or the note's stated due date, under New York's statute of limitations for actions on a contractual obligation (Civil Practice Law and Rules Section 213). If the note is a consumer credit transaction, a shorter 3-year period applies instead, and it isn't revived by a later partial payment or acknowledgment of the debt.
Yes. Promissory notes are commonly used for both family loans and business or LLC loans in New York. A corporation borrowing under a note generally cannot raise civil usury as a defense at all, and a lender who is engaged in the business of making loans of $25,000 or less to individuals (or $50,000 or less for a business loan) at an above-market rate generally needs a Licensed Lender license, though an isolated private note doesn't trigger that requirement.