A California promissory note is a written agreement between a lender and a borrower wherein the borrower is in debt to the lender for a certain sum of money that they promise to pay back by a certain date. The borrower will also be charged interest on top of the loan amount, and failure to pay back the entire sum on time may result in late fees. If the lender does not receive their money at all, they may commence a lawsuit to seek restitution.
A promissory note will include the information on both parties, the total amount owed to the lender, the interest rate on the loan, method of payment (installments or all at once), late fees, and the signatures of the parties. Unlike a loan contract, a promissory note does not describe what will occur in the event of complete default by the borrower. However, legal action can be taken by the lender if the borrower refuses or fails to pay on time.
Secured Promissory Note – Requires an individual borrowing money to commit personal assets as collateral.
Unsecured Promissory Note – A loan recipient is not required to furnish any collateral under this agreement.
- Interest & Usury Laws: CONS Article XV
- Usury Rate for Personal, Family, or Household Purposes (CONS Article XV (1)): Over 10%
- Usury Rate for Home Purchases and Improvement, and Business Expenses (CONS Article XV (2)): Over 10% OR over 5% on top of Federal Reserve Bank of San Francisco’s discount rate, whichever is greater.
- Usury Rate for Money Judgment (CCP § 685.010): Over 10%
- Usury Rate for Judgment for Damages (CIV § 3287(c)): Over 7%
- Usury Rate for Pawn Brokers (CIV § 21200): Over 3%