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A Tennessee promissory note is a legal agreement between a lender and a borrower that outlines the conditions whereby money is lent. Once it has been signed, the document gives the lender security that they will be paid back with interest and on time. Interest rates cannot exceed state usury rates (see “Laws” below). In addition to agreeing to interest, the borrower may be required to offer up their personal property as collateral to be transferred to the lender if the loan isn’t paid on time.
The completed promissory note will include the total sum borrowed, the date on which it was lent, the rate of interest, payment schedule, late fees (if applicable), and the contact information of both parties.
Types (2)
Secured Promissory Note – An agreement whereby the borrower pledges an asset or personal property as collateral.
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Unsecured Promissory Note – A promissory note that is not backed by the borrower’s assets.
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Laws
- Interest & Usury Laws: Chapter 14 – Interest Rates Generally, Chapter 15 – Interest On Home Loans
- Usury Rate with Contract (§ 47-14-103(2), TN Dept. of Financial Institutions): 7.25%
- Usury Rate without Contract (§ 47-14-103(3)): 10%
- Usury Rate for Small Single-Payment Loans (§ 47-14-104(a)(1)): 10% if a single-payment loan is for an amount of $1,000 or less.
- Usury Rate for Home Loans (§ 47-15-102(b), TN Dept. of Financial Institutions): 5.91%