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)
Types of Michigan Promissory Notes
In Michigan, lenders can issue promissory notes that are secured by collateral or opt for unsecured versions, depending on the nature of the loan and borrower agreement.
Secured
Obtain financing by providing collateral in the form of an asset.
Unsecured
Secure a loan without collateral using personal connections or a good credit score.
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
Sample Michigan Promissory Note
This sample Michigan promissory note provides a clear example of the standard format. You can customize it to meet your needs and download it as a Word or PDF file.
