South Dakota Promissory Note
South Dakota promissory note template with no usury cap on written rates and a 6-year statute of limitations. Free template. Attorney review available.
Introduction
Write any interest rate into a South Dakota promissory note, and the state will enforce it. South Dakota Codified Laws Section 54-3-1.1 removes every usury ceiling once the maker and payee set their rate by written agreement, so a note can lawfully carry a rate that would be void in most other states. Leave the rate blank instead, and the note isn't rate-free: it defaults to the Category C statutory rate of 12% per year, one of seven flat default rates the state's interest-and-usury chapter keeps on the books for different situations (South Dakota Codified Laws Sections 54-3-4 and 54-3-16). 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, either on demand or by a set date, and it's the paper trail that makes a family loan, a business loan, or a loan between friends enforceable if the maker doesn't pay. South Dakota also permits a confession-of-judgment clause, but writing one into the note accomplishes nothing by itself. Under South Dakota Codified Laws Title 21, Chapter 26, the maker must sign a separate statement after the fact, verified under oath, and a court must hold a notice-and-hearing step that state law says may not be waived before judgment can be entered. A South Dakota note doesn't need to be notarized or witnessed to be enforceable. You generally have 6 years from a missed payment or the note's due date to sue to collect on a written note.
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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
South Dakota sets no maximum interest rate or usury restriction on a rate the maker and payee establish by written agreement. If the note doesn't state a rate, the default is the Category C statutory rate, 12% per year. (South Dakota Codified Laws Sections 54-3-1.1, 54-3-4, and 54-3-16)
- 3
A South Dakota promissory note does not need to be notarized or witnessed to be enforceable. South Dakota Codified Laws Section 57A-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.
- 4
Confession-of-judgment clauses (letting the payee obtain a court judgment without a full lawsuit) are permitted in South Dakota, but a clause written into the note itself doesn't accomplish anything alone. The maker must sign a separate written statement after default, verified under oath, and a court must hold a notice-and-hearing step that state law says may not be waived before entering judgment. (South Dakota Codified Laws Sections 21-26-1 through 21-26-5)
- 5
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 South Dakota. (South Dakota Codified Laws Section 15-2-13)
- 6
If a South Dakota promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement to protect its priority against other creditors. (South Dakota Codified Laws Section 57A-9-310)
- 7
Promissory notes are commonly used in South Dakota for family loans, small business loans, and LLC member loans. An isolated private loan like this doesn't require a money lender license, which South Dakota requires only for a person engaged in the business of lending money; a separate exemption also covers a lender making five or fewer loans in a 12-month period. (South Dakota Codified Laws Sections 54-4-52 and 54-4-37.1)
Key decisions before you file
Before you file a Promissory Note in South 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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South Dakota Requirements for Promissory Note
Maximum Legal Interest Rate (South Dakota Codified Laws Section 54-3-1.1)
South Dakota sets no maximum interest rate or usury restriction on a rate the maker and payee establish by written agreement. A specific statutory cap can still apply to a particular loan type elsewhere in the code, such as a licensed small-dollar lender.
Statute of Limitations (SDCL § 15-2-13)
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
Negotiability Requirements (SDCL § 57A-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.
Default Interest Rate When No Rate Is Stated (South Dakota Codified Laws Sections 54-3-4 and 54-3-16)
If a note does not state an interest rate in writing, the default rate is the Category C statutory rate, 12% per year, one of seven flat default rates the state fixes by statute for different contexts.
Secured Transaction Filing (South Dakota Codified Laws Section 57A-9-310)
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.
Notarization Not Required for Validity (South Dakota Codified Laws Section 57A-3-104)
South Dakota does not require a promissory note to be notarized or witnessed to be enforceable. Section 57A-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.
Confession of Judgment Permitted With Formal Process (South Dakota Codified Laws Sections 21-26-1 to 21-26-5)
A confession-of-judgment clause is permitted in South Dakota, but it does not take effect on its own. After default, the maker must sign a separate written statement, verified under oath, and a court must hold a notice-and-hearing step that state law says may not be waived before entering judgment.
Money Lender License Scope (South Dakota Codified Laws Section 54-4-52)
A money lender license is required only for a person engaged in the business of lending money. An isolated private person-to-person promissory note does not trigger this requirement. A separate exemption also covers a lender making five or fewer loans in a 12-month period with total outstanding loans under $4,000,000 (Section 54-4-37.1).
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