A Maryland promissory note is a legal document that outlines the terms and conditions agreed upon by the lender and borrower regarding the repayment of loaned money. The note includes the date by which the principal balance and interest shall be paid in full, and if the borrower fails to pay the entire balance, interest will accumulate at the greatest rate permitted by law.
Lenders can secure the note with collateral to minimize the financial risk of loaning money.
Laws: Maryland Code Commercial Law Title 9 governs the creation and implementation of promissory notes.
Statute of Limitations: Three years (12 years if the contract or promissory note is under seal). (§ 5-102)
By Type
Usury Laws and Interest Rates
Promissory notes must comply with Maryland’s usury laws, which you can find in Const. Art. III §57
Com. Law §12-103:
- With a Contract (§ 12-103(a)(1)): 8%
- Exceptions: Some loans allow a maximum interest rate of 24% (or 18% for loans before July 1, 1982). These loans include unsecured loans and installment loans not secured by real property. Loans secured by something other than a savings account may also be included. However, to impose a 24% interest rate, the loan must meet requirements outlined in § 12-103(a)(3) et seq.
- Without a Contract (§ 12-102): 6% per annum
- For Loan Secured by Certificate of Deposit (§ 12-103(a)(2)): 2% above the interest rate on the certificate of deposit.
- For Loan Secured by Mortgage or Deed of Trust (§ 12-103(d)): No maximum; must comply with federal law.
- Exceptions: It is allowable to apply any rate of interest to the following transactions:
- Loans granted to corporations (§ 12-103(e)(1)(I)).
- Commercial loans that exceed $15,000 and are not secured by residential real property (§ 12-103(e)(1)(ii)).
- Commercial loans that exceed $75,000 and are secured by residential real property (§ 12-103(e)(1)(iii)).
- Interest owed to a broker/dealer for a debit balance that can be paid on demand and secured (§ 12-103(f)).
