South Carolina Promissory Note

Introduction

Key Things to Know

1. 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. 2

   South Carolina's general usury statute caps interest at 6% per year, but the same sentence excuses any written contract with an express rate agreement, so a signed promissory note can carry any rate the maker and payee agree to. Without a stated rate, the default legal rate is 8.75% per annum. (South Carolina Code Sections 37-10-106, 34-31-20)

3. 3

   If the lender is regularly engaged in the business of making loans and the loan is a "consumer loan" (personal, family, or household use, $25,000 or less principal, or secured by land), the finance charge is capped separately at 12% per year for an ordinary lender or 18% per year, or a rate filed with the Department of Consumer Affairs, for a supervised lender. An isolated private person-to-person note is not a "consumer loan" and doesn't fall under this tier. (South Carolina Code Sections 37-3-104, 37-3-201, 37-3-305)

4. 4

   A South Carolina promissory note does not need to be notarized or witnessed to be enforceable. South Carolina Code Section 36-3-104 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. 5

   Confession-of-judgment clauses (a clause letting the payee get a court judgment without a full lawsuit) aren't banned outright in South Carolina; the negotiable-instruments statute even allows a note to include one without losing its status as a negotiable instrument. But such a clause is void if the note is a "consumer loan," a consumer credit sale, or made by a licensed consumer finance company, and even where it's allowed, producing an actual judgment requires a separate signed, sworn statement filed with the clerk of court, not just a clause in the note. (South Carolina Code Sections 36-3-104, 37-3-407, 34-29-170, 15-35-350)

6. 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 South Carolina. (South Carolina Code Section 15-3-530)

7. 7

   If a South Carolina promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement with the South Carolina Secretary of State to protect its priority against other creditors. Promissory notes are commonly used in South Carolina for both family loans and business or LLC loans. (South Carolina Code Section 36-9-310)

South Carolina Requirements for Promissory Note

• Maximum Legal Interest Rate (South Carolina Code Section 37-10-106)

  6% per annum by default, but any rate may be agreed upon a written contract with an express rate agreement. Absent a stated rate, the default legal rate is 8.75% per annum (Section 34-31-20).

• Maximum Rate Schedule for Supervised Lenders (South Carolina Code Section 37-3-305)

  A lender making supervised consumer loans at rates above the ordinary consumer-loan cap must file a maximum rate schedule with the South Carolina Department of Consumer Affairs and post it at each place of business; this filing requirement does not apply to a private person-to-person note.

• Negotiable Instruments Requirements (S.C. Code Ann. § 36-3-104)

  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.

• Statute of Limitations (S.C. Code Ann. § 15-3-530)

  Generally 3 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.

• Consumer Loan Scope Exemption (South Carolina Code Section 37-3-104)

  The Consumer Protection Code's consumer-loan rate tier and disclosure rules apply only to a loan made by a person regularly engaged in the business of making loans, for personal, family, or household use, of $25,000 or less or secured by land; an isolated private person-to-person note does not trigger these rules.

• Confession of Judgment Restricted for Consumer Loans (South Carolina Code Section 37-3-407)

  A confession-of-judgment authorization is void if the note is a consumer loan; for a note outside that category, the authorization doesn't affect negotiability, but entering an actual judgment still requires a separate signed, sworn statement filed with the clerk of court under Section 15-35-350.

• Secured Transaction Filing (South Carolina Code Section 36-9-310)

  If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the South Carolina Secretary of State to perfect and prioritize its security interest against other creditors.

• Notarization Not Required for Validity (South Carolina Code Section 36-3-104)

  South Carolina does not require a promissory note to be notarized or witnessed to be enforceable; notarization is optional and used only for evidentiary purposes.