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A promissory note in Georgia is a legally binding document in which the borrower promises to repay a specified amount of money under agreed-upon terms.
It is commonly used to document loan agreements in writing, detailing the loan amount, repayment schedule, method, and interest rate. Additionally, it presents a clear record of the agreement between the borrower and lender and ensures both parties are aware of their obligations.
To fully understand the meaning of promissory notes, read further to learn about the requirements for enforceability, different types of promissory notes, and other essential information.
Types of Promissory Notes in Georgia
The two main types of promissory notes in Georgia are secured and unsecured ones, differing in the level of protection they provide to lenders.
Types of Promissory Notes
#1. Secured Promissory Note
A secured promissory note includes a borrower's promise to repay the loan backed by collateral, such as property, vehicles, or other valuable assets. So, if the borrower defaults on repayment, the lender can claim the collateral to recover the owed amount.
With a secured promissory note, the lender has more chances to recover the money on time, as they are not solely dependent on the borrower's ability to repay.
#2. Unsecured Promissory Note
An unsecured promissory note, on the other hand, is based solely on the borrower's promise to repay. This type is enforceable, just like a secured note, but it offers the lender less guarantee since the lender entirely depends on the borrower's financial situation.
Signing Requirements for Promissory Notes in Georgia
The signing requirements for promissory notes in Georgia specify essential elements that must be included in this document to ensure its enforceability in a court of law. The key requirements for a promissory note in Georgia are as follows:
Signing Requirements
The document must be in written form.
It must clearly identify the parties involved—the lender and borrower.
The promissory note should include essential details about the Georgia debt agreement, such as loan amount, repayment terms, due dates, late payment fees, and interest rate.
The signatures of all parties are required for confirmation.
To strengthen enforceability, parties may consider having the document witnessed or notarized.
Additionally, using a promissory note template can simplify drafting and ensure all key details are included. So, by fulfilling these requirements, parties can create a secure and legally binding document for their loan agreements in Georgia.
Statutory Considerations for Georgia Promissory Notes
A promissory note in Georgia must adhere to the state’s usury laws as detailed in Title 7, Chapter 4 of the Official Code of Georgia Annotated. The laws regulate maximum interest rates based on the loan type and agreement.
To ensure compliance, using a promissory note sample can help lenders and borrowers understand how to structure their agreements while adhering to these regulations.
Understanding these promissory note Georgia requirements is crucial to ensure legal compliance, while non-compliance with these laws can render a promissory note unenforceable.
Type of Loan | Maximum Interest Rate | Relevant Provision |
Contract ($3,000 - $250,000) | Any agreed rate | |
Contracts ($3,000 or Less) | 16% per annum | Sec. 7-4-2(a)(2) |
Without a Contract | 7% per annum | |
On Judgments | Federal prime rate + 3% | |
Commercial Accounts (Past Due 30+ Days) | 1.5% monthly | |
Installment Loans ($3,000 or Less) | 10% per annum | |
Pawnbrokers | 25% per month for the first 90 days, 12.5% thereafter |
How to Enforce a Promissory Note in Georgia?
To enforce a promissory note in Georgia, the lender must first attempt to resolve the matter by sending a formal demand letter to the borrower requesting payment. If the borrower fails to repay, the lender can file a claim in Georgia small claims court, also called Magistrate court, for amounts up to $15,000.
To prove the debt, the lender should provide the enforceable promissory note in Georgia, along with evidence of the default, such as a payment history. An action to enforce a promissory note in Georgia must be initiated within six years after the due date stated in the note or after the due date is accelerated.
If successful, the lender may seek remedies like wage garnishment or liens to recover the debts.
How Can a Promissory Note in Georgia Be Changed or Revoked?
A promissory note in Georgia can be changed or revoked with mutual agreement from both parties. If both the lender and borrower agree to modify the terms of the note, it is essential to document any changes in writing to ensure clarity and avoid potential disputes. Additionally, both parties must sign the revised document to make changes legally binding.
When adjusting terms, it’s important to ensure the revised agreement aligns with the original repayment agreement in Georgia to maintain its enforceability.