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An Ohio promissory note is a written contract whereby an individual promises to repay a loan to the lender by a specified date. A promissory note is often used between parties that have an already well-established relationship as it holds the borrower accountable to repay the lender but doesn’t contain the punitive default provisions found in a loan agreement.
The agreement should outline repayment deadlines, interest rates, late fees, and collateral (if necessary). If the borrower fails to uphold their end of the agreement, Ohio law states that the lender will have six (6) years to take action against the borrower (§ 1303.16(a)).
Types (2)
Secured Promissory Note – This form outlines repayment terms for a loan secured by a borrower’s personal assets.
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Unsecured Promissory Note – A lending instrument where the borrower is not required to pledge their assets as collateral.
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Laws
- Interest & Usury Laws: Chapter 1343 – Interest
- Usury Rate with Contract (§ 1343.01): 8%. A greater interest rate can be charged in the following scenarios:
- The original amount of the principal exceeds $100,000.
- The payment is to an entity registered under the “Securities Exchange Act of 1934”.
- The loan is secured by a deed of trust or mortgage.
- The loan is to be paid in one (1) installment and is not secured by any household furnishings.
- The loan is a business loan to an entity.
- The loan is secured by the borrower’s salary or wages.
- Usury Rate without Contract (§ 1343.03(A) & § 5703.47(B)): The federal short-term rate rounded to the nearest whole number plus 3%.
- Usury Rate for Monetary Judgments (§ 1343.02): At the rate specified in the contract