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.
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
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.
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
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.
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.
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.
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.
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.
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).
Frequently Asked Questions
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, one of seven flat default rates fixed in the state's interest-and-usury chapter.
No. South Dakota Codified Laws Section 57A-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, the interest rate, the repayment schedule, what counts as default, and the signatures of the maker and payee. South Dakota allows a confession-of-judgment clause, but acting on it after a default still requires the maker to sign a separate sworn statement and the court to hold a notice-and-hearing step that cannot be waived, not just presenting the signed note.
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 South Dakota Codified Laws Section 57A-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 rather than real estate, the lender generally needs to file a UCC-1 financing statement 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 a confession-of-judgment clause, the payee still can't skip a lawsuit automatically: the maker must sign a separate sworn statement after the default, and a court must hold a notice-and-hearing step that state law says may not be waived before entering judgment.
Generally 6 years from a missed payment or the note's stated due date, under South Dakota's statute of limitations for actions on a contract (South Dakota Codified Laws Section 15-2-13). Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used for both family loans and business or LLC loans in South Dakota. An isolated private loan like this doesn't trigger South Dakota's money lender licensing law, which applies only to a person engaged in the business of lending money, not to an occasional private transaction.