North Dakota Promissory Note
North Dakota promissory note template with the state's floating usury cap and 6-year statute of limitations. Free template. Attorney review available.
Introduction
North Dakota punishes overcharging twice: exceed the legal maximum and the note forfeits every dollar of interest it carries, plus a separate forfeiture of 25% of the principal, on top of a possible class B misdemeanor charge. The cap itself isn't a flat percentage: North Dakota Century Code Section 47-14-09 sets it at 5.5 points above the average six-month Treasury bill rate for the state, recalculated monthly by the state banking commissioner, with a floor of 7% per year. Absent a written rate, the default is a flat 6% per year. A promissory note is a written, signed promise by one party, the maker, to pay a definite sum to another, the payee, on demand or by a set date. Loans to corporations, LLCs, trusts, and tax-filing partnerships, plus any loan over $35,000, fall outside the cap entirely. A North Dakota note doesn't need to be notarized or witnessed to be enforceable. Confession-of-judgment clauses aren't banned, but a bare clause in the note accomplishes nothing alone: the payee only gets a judgment by confession through a separate written statement the maker signs and swears to after the fact, reviewed by a court under North Dakota Rules of Civil Procedure Rule 68.1. You generally have 6 years from a missed payment or the note's due date to sue to collect.
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 Dakota's usury cap (the legal ceiling on interest) is not a flat number: it is 5.5 percentage points above the average six-month U.S. Treasury bill rate for the state, recomputed and declared on the last day of each month by the state banking commissioner, but never less than 7% per year. Absent a written rate, the default legal rate is a flat 6% per year. (North Dakota Century Code Section 47-14-09; Section 47-14-05)
- 3
Several categories of loan fall outside the usury cap entirely: a loan to a corporation, LLC, cooperative, or trust; a loan to a partnership or association that files a partnership income tax return; a loan or forbearance with a principal over $35,000; a pawnbroking transaction of $10,000 or less; and a loan made by a state- or federally-regulated lending institution. (North Dakota Century Code Section 47-14-09(2))
- 4
A North Dakota promissory note does not need to be notarized or witnessed to be enforceable. North Dakota Century Code Section 41-03-04 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 a full lawsuit) are not banned in North Dakota, but a clause written into the note itself is not enough. The payee can only get judgment by confession through a separate written statement, signed by the maker and verified by oath after the fact, filed with and reviewed by a court under North Dakota Rules of Civil Procedure Rule 68.1.
- 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 North Dakota. (North Dakota Century Code Section 28-01-16)
- 7
If a North Dakota 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. (North Dakota Century Code Section 41-09-30) Promissory notes are commonly used in North Dakota for family loans, small business loans, and LLC loans between members; an isolated private loan does not require a Money Brokers Act license, which applies only to someone engaged in money brokering in the ordinary course of business. (North Dakota Century Code Section 13-04.1-01.1)
Key decisions before you file
Before you file a Promissory Note in North Dakota, 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 Dakota Requirements for Promissory Note
The usury cap is 5.5 percentage points above the average six-month U.S. Treasury bill rate for North Dakota, recomputed and declared monthly by the state banking commissioner, but never less than 7% per annum. Interest may not be compounded, and a minimum interest charge of $15 is permitted.
If a loan does not specify a rate in writing, the legal default rate is a flat 6% per annum, and unless the parties agree otherwise in writing, the same rate applies both before and after the note's maturity date.
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; notarization or witnessing is not required for a North Dakota note to be enforceable.
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
Charging more than the applicable cap forfeits the entire interest the note carries plus 25% of the principal, and a willful violation is also a class B misdemeanor. Loans to corporations, LLCs, cooperatives, trusts, and tax-filing partnerships, a loan over $35,000, a pawnbroking transaction of $10,000 or less, and loans by regulated lending institutions are exempt from the cap entirely.
A money broker license is required only for a person who, in the ordinary course of business, arranges or provides loans as a form of financing. An isolated private person-to-person promissory note does not trigger this licensing requirement.
A judgment by confession is not banned, but a clause in a note alone does not authorize one. It requires a separate written statement, signed by the maker and verified by oath, presented to and reviewed by a court, which then orders the clerk to enter judgment.
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.
Frequently Asked Questions
North Dakota's usury cap floats rather than sitting at a fixed number: it is 5.5 percentage points above the average six-month U.S. Treasury bill rate for the state, recomputed monthly by the state banking commissioner, but never less than 7% per year. Absent a written rate, the default legal rate is a flat 6% per year. Loans to corporations, LLCs, tax-filing partnerships, and any loan over $35,000 are exempt from the cap entirely.
No. North Dakota Century Code Section 41-03-04 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 Dakota's index-tied usury cap, the repayment schedule, what counts as default, and the signatures of the maker and payee. If you want a confession-of-judgment option, note that a clause in the note alone doesn't work; it only becomes usable after a default, when the maker separately signs and swears to a statement under North Dakota Rules of Civil Procedure Rule 68.1.
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 Dakota Century Code Section 41-03-04: 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 under North Dakota Century Code Section 41-09-30.
The payee can declare the remaining balance immediately due (if the note includes an acceleration clause) and can sue to collect. A confession-of-judgment clause in the note alone does not let the payee skip a lawsuit; the payee still needs the maker to sign and swear to a separate written statement of the debt after default, reviewed by a court under North Dakota Rules of Civil Procedure Rule 68.1, before judgment can be entered.
Generally 6 years from a missed payment or the note's stated due date, under North Dakota Century Code Section 28-01-16, which covers actions on a written contract. Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used in North Dakota for both family loans and business or LLC loans. An isolated private loan does not require a Money Brokers Act license, since that license only applies to someone engaged in money brokering in the ordinary course of business, though loans to a corporation, LLC, or tax-filing partnership are also exempt from the usury cap that applies to a personal loan.