A Kentucky promissory note is a legally binding document used by a lender to loan money to a borrower while outlining the terms and conditions of repayment. This note specifies the amount borrowed, interest rates, payment schedule, and any penalties for late payments.
It serves as proof of debt and is enforceable by law. Lenders must comply with the legal maximum interest rates, or they may face consequences for charging higher rates.
Laws: Kentucky Revised Statutes Chapter 360 governs the creation and implementation of promissory notes.
Statute of Limitations: 5 years. (§ 413.120 (5))
By Type
Usury Laws and Interest Rates
Promissory notes must comply with Kentucky’s usury laws, which you can find in Title XXIX, Ch. 360:
- Without a Contract (§ 360.010(1)): 8%.
- With a Contract (§ 360.010 (1(a))): 19% OR federal discount rate + 4% (whichever is lower) if agreed upon. The interest rate cannot exceed:
- Loans of $15,000 or less – 19%, or 4% above the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank, whichever is less.
- Loans over $15,000 – no maximum interest rate.
- For Judgments (§ 360.040): 6%, unless another rate is agreed to in writing, in which case the interest rate cannot exceed the contract rate; 12% for judgments on unpaid child support
- For High-Cost Home Loans (§ 360.100(2)): For home loans between $15,000 and $200,000, the prepayment penalty cannot exceed 3%, 2%, and 1% for the first, second, and third years respectively. The closing fees will be either $3,000 or 6% of the loan amount (whichever is greater).
- For Credit Union Loans (§ 286.6-435 & § 286.6-465): The credit union limits the interest rate on loans to members to a maximum of 10% of its capital. Interest rates for savings accounts are 2% per month.
- For Pawnbrokers (§ 226.080): 2% per month, and the fee cannot exceed one-fifth (1/5) of the loan amount.
- For Consumer Loan Companies (§ 286.4-530): 3% per month on loans less than $3,000; 2% per month on loans greater than $3,000.
