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A Massachusetts promissory note is a document that specifies the terms of a loan and ensures the borrower repays the debt by a certain date. It sets forth the loan’s interest rate, maturity date (the deadline for repayment), installment plan, and whether or not late fees will be charged. Furthermore, the lender may require the borrower to appoint a co-signer (someone who will assume the contract’s obligations if the borrower defaults) or secure the loan with collateral. If a default is not cured and cannot be resolved between the two (2) parties, the lender can use the document as evidence of a contract breach and sue the borrower.
In Massachusetts, parties can agree to any interest rate up to 20% so long as it’s in writing.
Types (2)
Secured Promissory Note – Allows a lender to claim a borrower’s assets if they default on the agreement.
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Unsecured Promissory Note – Used to document a loan transaction that does not include any collateral.
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Laws
- Interest & Usury Laws: §§ 107.3 & 271.49
- Usury Rate with Contract (§ 107.3): No limit
- Usury Rate without Contract (§ 107.3): 6%, unless there is an agreement or provision specifying a different rate. Exceptions exist for certain small loans under $1000 (§ 140.90).
- Criminal Usury Rate (§ 271.49): 20%
- Usury Rate for Mortgages (§ 140.90A): 1.5% per month for loans over $1500 that are backed by a mortgage on property assessed below $40, 000. This rate applies before default and for 6 months following. 1% per month may be charged after that point.
- Usury Rate for Pawnbrokers (Mass. Gov): 12-36% APR depending on the city/town