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A Minnesota promissory note is a contract that defines the conditions of a loan between two (2) parties. The parties can use the document to relay provisions such as the loan maturity date, the repayment method, and the collateral the borrower must put up to secure the loan. When a debtor defaults on a “secured” loan, they will transfer an agreed-upon property to the lender without any additional penalties or obligations. However, if the security value is less than the borrowed sum, the debtor will be liable for the remaining balance, subject to interest at the maximum legal rate.
By executing a promissory note, both parties bind themselves to its conditions, and the lender has the right to pursue legal action if the debt is not repaid on time.
Types (2)
Secured Promissory Note – Provides parties involved in a loan transaction a means to relay loan terms and secure financing with collateral.
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Unsecured Promissory Note – The details of a loan agreement that does not involve collateral are outlined in this agreement.
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Laws
- Interest & Usury Laws: Chapter 334
- Usury Rate in General (§ 334.01): 6% per year, unless a different rate is agreed to in writing, in which case the interest rate cannot exceed 8%.
- Usury Rate for Contracts Over $100,000 (§ 334.01 Subd. 2): No maximum, except for mortgage loans (§ 47.20 Subd. 4a.(a)) and mortgage prepayment penalties (§ 58.137 Subd. 2(a)(4)).
- Usury Rate for Business or Agricultural Loans (less than $100,000) (§ 334.011 Subd. 1): 4.5% above the 90-day commercial paper discount rate.
- Usury Rate for Loans by Charitable Organizations (less than $10,000) (§ 334.011 Subd. 5): 16%
- Usury Rate for Loans Secured by Savings Account (§ 334.012): 2% in excess of the interest rate payable on the account.
- Usury Rate for Monetary Judgments* (§ 549.09):
- Judgments under $50,000 – Interest will be calculated according to the secondary market yield of one (1) year US Treasury bills, calculated on the bank discount basis as provided in 549.09(c)(1)(i).
- Judgments over $50,000 – 10%
*Not applicable to judgments in family court actions (except for child support awards in judgments of less than $50,000).