An Alabama promissory note is a legally binding document that outlines the terms of a loan agreement between a lender and a borrower. It serves as a written promise from the borrower to repay a specific amount of money and any accrued interest within a defined period.
The document includes details such as the borrowed sum, interest rate, repayment schedule, and any late charges or penalties for failing to meet loan obligations. Upon signing, both parties commit to the predetermined terms, thereby ensuring protection in the event of disputes or non-compliance.
Laws: Promissory notes fall under Alabama Code Title 7 and Title 8.
Statute of Limitations: Six years (Ala. Code § 6-2-34).
Usury Laws and Interest Rates
The promissory note must adhere to the state’s usury laws as outlined in Title 8, Chapter 8.
- With a Contract (§ 8-8-1): 8%.
- Without a Contract (§ 8-8-1): 6%.
- For Loans Secured by Savings Account (§ 8-8-1.2): 2% added to the interest rate (rate of return) applied to the account.
- For Loans ($2,000+) (§ 8-8-5): No limit.
- For Judgments (§ 8-8-10): 7.5% or the rate specified in the contract.
- For Board of Education Loans ($100,000+) (§ 8-8-4): 15%.
