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Promissory Note

Free promissory note template for a family loan, small business loan, or LLC loan. Interest rate caps and other rules vary by state. Attorney review available.

Introduction

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. It's the paper trail behind a loan, and it's what makes a debt legally enforceable if the maker doesn't pay. The same basic document works for different situations: a loan between family members or friends, a small business borrowing working capital, or a loan between an LLC and one of its own members. What changes isn't the note's core structure, it's the state law that governs it. Every state sets its own maximum legal interest rate (a "usury cap") for an ordinary private loan, and these caps vary widely, from a flat percentage to a tiered or floating-rate system, with certain lenders often exempt. States also differ on whether a note needs to be notarized, how long you have to sue on a missed payment, and whether a confession-of-judgment clause (letting a lender obtain a judgment without a lawsuit) is allowed at all. Because these rules are state-specific, select your state below for a template built around that state's actual interest rate cap, statute of limitations, and filing requirements. Attorney review is available if you want a licensed attorney to look over the finished note before you sign it.

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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. Most states recognize a similar set of requirements for a note to count as a valid, enforceable negotiable instrument: an unconditional promise, a fixed amount, a signature, and payment on demand or at a definite time.

  2. 2

    Most states cap the interest rate a lender can charge on an ordinary private loan (a "usury cap"), but the cap itself varies significantly from state to state, some set a single flat percentage, others use a tiered system based on loan size or purpose, and others tie the cap to a floating benchmark rate. There is no single national interest rate limit, so check the cap for the state whose law governs your note.

  3. 3

    Many states exempt certain categories of lender, such as banks, credit unions, and state-licensed finance lenders, from their usury caps entirely. A usury cap typically targets the general private person-to-person or person-to-business loan, not every kind of lending transaction.

  4. 4

    In most states, a promissory note does not need to be notarized or witnessed to be enforceable. Notarization is commonly optional and used mainly as evidence of who signed the note, but this can vary, so confirm the rule for your state if notarization matters to you.

  5. 5

    An unsecured note relies only on the maker's promise to pay. A secured note is backed by collateral that the payee can claim if the maker defaults, and in most states, a lender that takes personal property as collateral needs to file a UCC-1 financing statement with the appropriate state agency to protect its priority against other creditors.

  6. 6

    Confession-of-judgment clauses, which let a payee obtain a court judgment against the maker without filing a full lawsuit, are restricted or banned outright in a number of states, and treated differently depending on the size or purpose of the loan in others. Whether this kind of clause is usable at all depends heavily on the state whose law governs the note.

  7. 7

    How long you have to sue to collect on a missed payment (the statute of limitations) is set by each state individually and commonly runs several years from the missed payment or the note's due date, but the exact period differs by state and can be shorter for certain types of consumer loans.

  8. 8

    The same promissory note format is commonly used for a family loan, a loan between friends, a small business loan, and a loan between an LLC or other business entity and its own members, among other situations. The document's core mechanics stay the same across these uses, but the interest rate limit, notarization rule, statute of limitations, and confession-of-judgment rule that apply all depend on the state whose law governs the loan.

Key decisions before you file

Before you file a Promissory Note in Washington DC, 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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Washington DC Requirements for Promissory Note

  • Usury Limitations (D.C. Code § 28-3301)

    The interest rate must comply with DC's usury laws, which cap interest at 24% per annum for written agreements. Exceeding this rate may render the interest provisions unenforceable or subject to penalties.

  • Statute of Limitations (D.C. Code § 12-301)

    Legal action to enforce the promissory note must be commenced within 3 years from the date the cause of action accrues (typically when default occurs).

  • Truth in Lending Disclosures (15 U.S.C. § 1601 et seq. (Truth in Lending Act))

    For consumer loans, the note must include clear disclosures of APR, finance charges, amount financed, and total payments as required by federal law.

  • Equal Credit Opportunity (15 U.S.C. § 1691 (Equal Credit Opportunity Act))

    The promissory note and underlying loan agreement must not discriminate on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

  • Negotiable Instrument Requirements (D.C. Code § 28:3-104 (UCC Article 3))

    To be negotiable, the note must be in writing, signed by the maker, contain an unconditional promise to pay a fixed amount of money, be payable on demand or at a definite time, and be payable to order or bearer.

  • Default Provisions (D.C. Code § 28:1-201, § 28:1-303 (UCC))

    The note must clearly define what constitutes a default and specify the consequences, including acceleration of the debt, late fees, and collection procedures.

  • Consumer Protection Compliance (D.C. Code § 28-3901 et seq.)

    The note must comply with DC's Consumer Protection Procedures Act, which prohibits unfair or deceptive trade practices in consumer transactions.

  • Electronic Signatures (15 U.S.C. § 7001 et seq. (E-SIGN Act); D.C. Code § 28-4901 et seq. (UETA))

    If executed electronically, the note must comply with federal and DC laws regarding electronic signatures and records.

  • Prepayment Rights (12 C.F.R. § 1026.18(k) (Regulation Z))

    For consumer loans, the note must disclose whether the borrower has the right to prepay the loan without penalty and any conditions for prepayment.

  • Late Fee Limitations (D.C. Code § 28-3312)

    Late fees must be reasonable and clearly disclosed in the note. DC courts may scrutinize excessive late fees as potential penalties rather than liquidated damages.

  • Attorney's Fees Provisions (D.C. Code § 28-3823)

    Provisions for recovery of attorney's fees in the event of default must be reciprocal, allowing either party to recover fees if they prevail in litigation.

  • Choice of Law (D.C. Code § 28:1-301 (UCC))

    If the note specifies governing law other than DC, it must have a reasonable relationship to the chosen jurisdiction and not violate DC public policy.

  • Debt Collection Practices (15 U.S.C. § 1692 et seq. (Fair Debt Collection Practices Act))

    Collection efforts related to the note must comply with federal restrictions on harassment, false representations, and unfair practices.

  • Military Lending Protections (10 U.S.C. § 987 (Military Lending Act); 50 U.S.C. § 3901 et seq. (Servicemembers Civil Relief Act))

    For borrowers who are servicemembers, the note must comply with interest rate caps (36% Military APR) and other protections under federal law.

  • Notarization Requirements (D.C. Code § 42-101 et seq.)

    While not strictly required for promissory notes in DC, notarization adds a layer of authentication and may be necessary if the note is secured by real property.

  • Secured Transaction Disclosures (D.C. Code § 28:9-101 et seq. (UCC Article 9))

    If the note is secured by personal property, it must comply with UCC Article 9 requirements for describing collateral and perfecting security interests.

  • Mortgage Loan Originator Requirements (D.C. Code § 26-1101 et seq.; 12 U.S.C. § 5101 et seq. (SAFE Act))

    If the note is for a residential mortgage loan, the originator must be properly licensed and the note must comply with additional disclosure requirements.

  • Small Business Lending Transparency (D.C. Code § 28-3901 et seq.; 15 U.S.C. § 1601 et seq.)

    For small business loans, the note should include clear disclosures of APR, fees, prepayment policies, and default consequences as increasingly required by state and federal regulators.

  • Bankruptcy Considerations (11 U.S.C. § 101 et seq. (Bankruptcy Code))

    The note should acknowledge that enforcement may be limited by federal bankruptcy laws and cannot include provisions attempting to circumvent bankruptcy protections.

  • Confession of Judgment (D.C. Code § 28-3904; D.C. Superior Court Civil Rule 68-I)

    DC generally disfavors confession of judgment clauses that waive the borrower's right to notice and hearing before judgment. Such provisions may be unenforceable, especially in consumer transactions.

Does your Promissory Note need to be notarized in Washington DC?

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Frequently Asked Questions