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Types (2)
Secured Promissory Note – Requires the borrower to put down an asset as collateral before receiving funds from the lender.
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Unsecured Promissory Note – Does not require a pledge of collateral (should only be used for low-risk borrowers).
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Laws
- Interest & Usury laws: 815 ILCS 205 & 815 ILCS 123
- Usury Rate for Written Contracts (815 ILCS 205/4): *9% APR, unless otherwise authorized by the Predatory Loan Prevention Act (PLPA), in which case the interest rate cannot exceed 36% APR. **The following transactions are subject to the PLPA:
- Consumer Loans (205 ILCS 670/15(a))
- Payday Loans (815 ILCS 122/2-5(e-5))
- Retail Installment Contracts (815 ILCS 405/27)
- Retail Charge Agreements (815 ILCS 405/28)
- Vehicle Retail Installment Contracts (815 ILCS 375/21)
- Usury Rate for Money Due on Written Instrument (815 ILCS 205/2): 5%
- Usury Rate for Monetary Judgments (735 ILCS 5/2-1303(a)): 9%, or 6% if the debtor is a unit of local government (e.g., county, township, municipality).
- Usury Rate for Loan or Forbearance (815 ILCS 205/1): 5%
- Usury Rate for Pawnbrokers (205 ILCS 510/2): 3% per month.
*Any rate of interest may be charged by banks and savings banks. Furthermore, any rate of interest may be applied with respect to the transactions listed in 815 ILCS 205/4(1)(a) – (n), unless specifically prohibited by the PLPA.
**The PLPA does not apply to banks, savings banks, savings and loan associations, credit unions, and insurance companies.