North Carolina Promissory Note
North Carolina promissory note template within the state's monthly-published rate cap (16% floor) and 3-year SOL. Free template. Attorney review available.
Introduction
North Carolina doesn't write its usury ceiling into the statute book as a fixed number. North Carolina General Statutes Section 24-1.1 has the Commissioner of Banks publish a new maximum rate every month for a loan of $25,000 or less: the latest six-month Treasury bill rate plus 6 percentage points, rounded to the nearest half percent, or 16% per annum, whichever is greater. That floor has kept the published rate at 16% every month since 1984, over four decades of a figure that gets "republished" without actually moving. Push a loan past $25,000 and the cap disappears, letting the parties agree to any rate in writing; without a written rate, the default legal rate is 8% per annum. A promissory note is a written, signed promise by one party, the maker, to pay a definite sum of money to another, the payee, either on demand or by a set date, the paper trail behind a family loan, a business loan, or a loan between friends that makes the debt enforceable if the maker doesn't pay. A North Carolina note doesn't need to be notarized or witnessed to be enforceable. Unlike states that ban confession-of-judgment clauses outright, North Carolina has a working court procedure for one, set out in Rule 68.1 of the state's Rules of Civil Procedure. You generally have 3 years from a missed payment or the note's due date to sue to collect on a written note, shorter than the limitations period in many other states.
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
North Carolina does not fix its usury ceiling as a number in the statute itself. For a loan of $25,000 or less, the Commissioner of Banks announces and publishes the maximum rate on the 15th of each month: the latest six-month Treasury bill rate plus 6%, rounded to the nearest half percent, or 16% per annum, whichever is greater, a floor that has held the published rate at 16% every month since 1984. Above $25,000, the parties may agree to any rate in writing. Absent a written rate, the default legal rate is 8% per annum. (North Carolina General Statutes Section 24-1.1; Section 24-1)
- 3
For a loan under $5,000 to a natural person, incurred primarily for personal, family, or household purposes, the annual percentage rate, including origination fees, may not exceed 36%. Knowingly charging more than the applicable cap forfeits the lender's entire interest on the note, and if the excess interest was already paid, the borrower may recover back double that amount. (North Carolina General Statutes Section 24-1.1(e); Section 24-2)
- 4
A North Carolina promissory note does not need to be notarized or witnessed to be enforceable. North Carolina General Statutes Section 25-3-104 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.
- 5
North Carolina has not banned confession-of-judgment clauses (a clause letting the payee get a court judgment without a full lawsuit) the way some states have. Rule 68.1 of the North Carolina Rules of Civil Procedure lets a maker confess judgment, for a debt already owed or one that may only become due later, by filing a signed and verified statement with the clerk of superior court in the county where the maker resides, where the maker owns real property, or where the payee resides. (North Carolina General Statutes Section 1A-1, Rule 68.1)
- 6
You generally have 3 years from a missed payment or the note's stated due date to sue to collect on a written promissory note in North Carolina. (North Carolina General Statutes Section 1-52(1))
- 7
If a North Carolina promissory note is secured by personal property, the lender generally needs to file a UCC-1 financing statement with the North Carolina Secretary of State to protect its priority against other creditors. A lender who makes loans of $25,000 or less at charges above Chapter 24's caps generally needs a North Carolina Consumer Finance Act license from the Commissioner of Banks; a private lender who stays within Chapter 24's caps does not. (North Carolina General Statutes Section 25-9-310; Section 25-9-501; Section 53-166)
Key decisions before you file
Before you file a Promissory Note in North Carolina, 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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North Carolina Requirements for Promissory Note
for a loan of $25,000 or less, the cap is the rate the Commissioner of Banks publishes monthly (the six-month Treasury bill rate plus 6%, or 16% per annum, whichever is greater); above $25,000, no statutory cap applies. The default rate absent a written contract rate is 8% per annum (Section 24-1), and a loan under $5,000 to a natural person for personal, family, or household purposes carries a separate 36% all-in annual percentage rate ceiling (Section 24-1.1(e)(3)).
knowingly charging more than the applicable cap forfeits the entire interest the note carries; if the excess interest was already paid, the payer may recover back double the amount paid.
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 3 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
North Carolina does not require a promissory note to be notarized or witnessed to be enforceable; notarization is optional and used only for evidentiary purposes.
a license from the Commissioner of Banks is required only to engage in the business of lending or servicing a loan of $25,000 or less at charges above what Chapter 24 otherwise permits; a private lender staying within Chapter 24's caps does not need one.
if a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the North Carolina Secretary of State to perfect and prioritize its security interest.
North Carolina permits confession of judgment, for a debt already due or one that may become due later, only through a signed and verified statement filed with the clerk of superior court in the county where the maker resides, owns real property, or where the payee resides; a bare contract clause does not itself create the judgment.
Frequently Asked Questions
For a loan of $25,000 or less, North Carolina's cap isn't a fixed number in the statute. The Commissioner of Banks announces and publishes the maximum rate on the 15th of every month, calculated as the six-month Treasury bill rate plus 6%, or 16% per year, whichever is greater, and that floor has kept the published rate at 16% every month since 1984. Above $25,000, the parties may agree to any rate in writing. Without a written rate, the default legal rate is 8% per year, and a loan under $5,000 to a natural person for personal, family, or household purposes has a separate 36% all-in APR ceiling.
No. North Carolina General Statutes Section 25-3-104 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 North Carolina's usury cap, the repayment schedule, what counts as default, and the signatures of the maker and payee. If you want a confession-of-judgment provision, it isn't self-executing; North Carolina requires its own separate filed, verified statement under Rule 68.1 of the Rules of Civil Procedure before a court will enter that judgment.
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 North Carolina General Statutes Section 25-3-104: 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, the lender generally needs to file a UCC-1 financing statement with the North Carolina 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. North Carolina hasn't banned confession-of-judgment clauses, so a payee can also pursue a confession of judgment under Rule 68.1, but only by filing a separate signed, verified statement with the clerk of superior court in a proper county; the clause in the note alone doesn't create the judgment.
Generally 3 years from a missed payment or the note's stated due date, under North Carolina's statute of limitations for actions on a contract (North Carolina General Statutes Section 1-52(1)). That's shorter than the limitations period in many other states, so waiting too long can mean losing the right to sue on the note faster than you might expect.
Yes. Promissory notes are commonly used in North Carolina for both family loans and business or LLC loans. A private lender who keeps a loan of $25,000 or less within Chapter 24's rate caps doesn't need a North Carolina Consumer Finance Act license, which covers the typical occasional family or LLC loan; a lender charging above those caps on a loan that size does.