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A Vermont promissory note is a contract between a lender and borrower by which the borrower is lent a sum of money with conditions of repayment. If the borrower doesn’t repay the lender on time with the requisite interest, they may need to pay further interest charges, late fees, or face legal action. This type of loan contract is typically used by individuals who are familiar with each other, and it serves primarily as a record of the loan and its due date.
In Vermont, when the annual interest on a promissory note becomes past due, the amount of unpaid interest will accumulate simple interest until the total balance is paid. However, any payments made during the first year that annual interest began to accrue will be applied towards the loan’s simple interest, annual interest, and principal, in that order (§ 49).
Types (2)
Secured Promissory Note – A financial agreement for a loan with collateral provided as security on repayment.
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Unsecured Promissory Note – A loan without any collateral provided by the borrower.
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Laws
- Interest & Usury Laws: Chapter 4 – Interest
- Usury Rate (§ 41a(a)): 12%
- Usury Rate for Credit Cards (§ 41a(b)(3)): As agreed upon by lender and borrower.
- Usury Rate for Loans with Vehicle as Collateral (§ 41a(b)(4)):
- If vehicle is current or previous model year – 18%
- If vehicle is older than current or previous model year – 20%
- Usury Rate for Installment Loans (§ 41a(b)(5)): Interest will be calculated at 24% for the first $1000 lent and 12% for any amount in excess of $1000 or 18% annual percentage rate (APR) on the total balance, whichever is lesser.
- Usury Rate for Loans Secured by Subordinate Lien (§ 41a(b)(7)): 18%