A Tennessee promissory note is a formal, signed agreement committing the borrower to repay a specified sum to the lender within an agreed-upon period. The borrower may need to pay interest at a legally permissible rate.
This document is useful for personal and business loans, outlining critical loan aspects such as the repayment schedule, principal amount, interest rate, and collateral (if applicable) that the borrower pledges for loan security. Promissory notes’ enforceability ensures lenders have recourse in case the borrower can’t finish making the payments they owe.
Laws: Title 47, Chapter 3 of the TN Code governs the creation and implementation of promissory notes.
Statute of Limitations: Six years (§ 47-3-118).
Types of Tennessee Promissory Notes
Tennessee borrowers and lenders both benefit when the right note is used. It determines how protected the lender is and how much flexibility the borrower has.
Secured
Requests that the borrower offer an asset to the lender before the lender loans them money.
Unsecured
Doesn't require the provision of an asset (like a vehicle) as collateral to obtain a loan.
Usury Laws and Interest Rates
Promissory notes must comply with Tennessee’s usury laws, which you can find in Chapter 14 (Interest Rates Generally) and Chapter 15 (Interest on Home Loans):
- Without Contract (§ 47-14-103(3)): 10% per annum.
- For Government-Issued Contracts (§ 47-14-103(2), TN Dept. of Financial Institutions): 7.25%.
- For Home Loans (§ 47-15-102(c), TN Dept. of Financial Institutions): No more than 2% above the current rate established by the Federal National Mortgage Association; Maximum rate of 18% per annum.
- For Small Single-Payment Loans of One Year or Less (§ 47-14-104(a)(1)): 10% if a single-payment loan is for $1,000 or less.
Sample Tennessee Promissory Note
View a free sample of a Tennessee promissory note to learn what elements it has. Then, create your own using our document editor and download the final version in PDF or Word format.
