A Michigan promissory note is a written agreement between a lender and borrower that outlines the terms of a loan. It specifies the loan amount, interest rate, repayment schedule, and consequences for default.
The note may also include a security provision requiring the borrower to put up collateral to secure the loan. A promissory note is often used when the parties know each other well and want a less formal agreement than a loan contract.
Laws: The Uniform Commercial Code, § 440.9408, governs the creation and implementation of promissory notes.
Statute of Limitations: Six years. (§ 600.5807)
By Type
Usury Laws and Interest Rates
Promissory notes must comply with Michigan‘s usury laws, which you can find in Act 259 & Act 326 of the Michigan Compiled Laws:
- With a Contract (§ 438.31): 7%
- Without a Contract (§ 438.31): 5% (Except for authorized loans).
- Criminal Rate (§ 438.41): It is illegal to charge greater than 25% per annum. Violators face a fine of up to $10,000, up to 5 years in prison, or both.
- For Pawnbrokers (§ 446.209(1)): 3% per month
