A Rhode Island promissory note is a binding agreement between a borrower and a lender, describing the conditions under which the borrower should repay the loan. It specifies the loan amount, repayment schedule, and interest rate. It also outlines the measures for the lender to take if the borrower fails to meet their payment obligations.
This document helps formalize the loan process outside of traditional banking institutions. A borrower can secure the loan with collateral or not, depending on the amount of risk the lender is willing to accept. Please note that state law imposes severe penalties for exceeding the legal interest rate limits, so it’s essential for lenders to follow statutory regulations in lending practices.
Laws: Title 6A of the Rhode Island General Laws covers promissory notes.
Statute of Limitations: Six years.
By Type
Usury Laws and Interest Rates
All promissory notes must abide by the state’s regulations for interest and usury, which fall under Title 6, Chapter 26 (Interest and Usury):
- In General (§ 6-26-2(a) & (b)): 21%, or the domestic prime rate plus 9%.
- For Monetary Judgments (§ 6-26-1): 12% per annum unless another rate is specified.
- For Small Loans (§ 19-14.2-8):
- Loans exceeding $800: 2%.
- Loans between $300 and $800: 2.5%.
- Loans up to and including $300: 3%.
