A Texas promissory note is a formal, binding record of a financial agreement where a borrower commits to repaying a specified sum to a lender under established conditions. This document outlines the involved parties, loan amount, interest rate, repayment schedule, and penalties for late payments. It also specifies what happens if the borrower entirely defaults.
Some promissory notes exist without collateral, but some lenders may request collateral from borrowers as an added security measure. As long as both parties agree to the defined terms, this document can help facilitate loan transactions and protect both parties’ interests.
Laws: Tex. Bus. & Com. Code § 26.02 discusses the writing of promissory notes.
Statute of Limitations: Four years (§ 16.004(a)(3)).
By Type
Usury Laws and Interest Rates
Title 4, Subtitle A (Interest) covers the interest and usury rates for promissory notes in Texas:
- Without a Contract (§ 302.002): 6% per annum.
- With a Contract (§ 302.001(b)): 10% per annum.
- Post Judgment (§ 304.003(c)):
- If the prime rate that the Board of Governors of the Federal Reserve System publishes is between 5% and 15%, the limit is the federal prime rate.
- If the published prime rate is more than 15%, the limit is 15%.
- If the published prime rate is less than 5%, the limit is 5%.
- For Money Judgments with a Contract (§ 304.002(2)): 18% per annum or the amount the contract specifies (whichever is lesser).
- Periodic Usury Ceiling (Texas Credit Letter, § 303.003, § 303.005, § 303.009): 18%.
- Usury Ceiling for Open-End Account Credit Agreements (§ 303.009(d)): 21%.
- Usury Ceiling for Credit Extensions (§ 303.009(c)): 28%.
