Illinois Promissory Note Template [PDF + Download]

A promissory note in Illinois is a legal document where the borrower promises to repay the loan amount under specified terms. This legally binding document formalizes an Illinois loan agreement by clearly stating the loan amount, due date, payment methods, and interest rate.

It provides both parties with a clear record of the loan and its terms and can be used as evidence in court if disputes arise.

This article will explore the meaning of the promissory note, break down its key elements, and more.

Types of Promissory Notes in Illinois

Promissory notes in Illinois are typically classified as secured or unsecured based on the level of protection they offer to the lender.

Types of Promissory Notes

#1. Secured Promissory Notes

A secured promissory note provides more protection to the lender. In this arrangement, the borrower offers an asset, such as a car or property, as collateral. As a result, if the borrower fails to repay the loan, the lender can take possession of the asset to recover the outstanding amount.

This type of note is often used for larger loans or when the lender seeks additional security.

#2. Unsecured Promissory Notes

An unsecured promissory note does not involve any collateral. It simply reflects the borrower's promise to repay the loan according to the agreed-upon terms. It is the most common type of promissory note and is frequently used for personal loans between trusted individuals, such as family members or friends.

With this type of promissory note, the lender solely relies on the borrower's word and financial reliability.

Signing Requirements for Promissory Notes in Illinois

A promissory note in Illinois must meet the following requirements to be legally enforceable:

Signing Requirements

The note must be in writing.
The names of the lender and borrower should be stated.
The document must include the loan amount, interest rate, payment method, and due date.
Both parties must sign the note to confirm the agreement.

These elements ensure the Illinois debt agreement is legally binding. However, having the document witnessed or notarized can provide an additional layer of legal protection and help prevent disputes over the agreement itself.

Moreover, you can use a promissory note template and adjust it according to your Illinois debt agreement. A template can help you create a comprehensive and legally sound promissory note that fits your agreement with the borrower.

Statutory Considerations for Illinois Promissory Notes

Illinois promissory note requirements are subject to state usury laws, which govern the maximum rates that can be charged on loans. The Predatory Loan Prevention Act (PLPA) limits the interest rate to 36% APR for certain loans, while the general interest rate for other transactions is capped at 9% APR.

Promissory notes in Illinois can be used for both personal and business loans, but they must comply with state laws to ensure validity. This includes adhering to the appropriate interest rate limits and ensuring that the terms of the note are clearly defined.

Type of Loan/Transaction	Interest Rate Cap (APR)
General Contract (815 ILCS 205/4)	9% unless authorized by PLPA
Consumer and Payday Loans (815 ILCS 205/4)	36% under PLPA
Money Due on Written Instrument (815 ILCS 205/2)	5%
Pawnbrokers (205 ILCS 511/15-10)	5%–20%, based on loan amount
Monetary Judgments (735 ILCS 5/2-1303(a))	9% (or 6% if the debtor is local government)
Loan or Forbearance (815 ILCS 205/1)	5%

How to Enforce a Promissory Note in Illinois

The first step in enforcing a promissory note in Illinois is to try and resolve the matter directly with the borrower. If they default on repayment, the lender can take legal action. An enforceable promissory note in Illinois allows the lender to file a lawsuit for repayment.

If the amount owed is up to $10,000, the lender can consider filing a claim in Illinois small claims court. The lender should keep in mind that Illinois has a 10-year statute of limitations for a breach of contract, including promissory notes. This means the lender must file a lawsuit within 10 years from the date the borrower defaults.

Once the lender obtains a judgment, they can enforce it through wage garnishment, bank levies, or property liens. In Illinois, the judgment remains in effect for seven years and can be renewed if necessary to continue collection efforts.

How Can a Promissory Note in Illinois Be Changed or Revoked?

A promissory note in Illinois can be changed or revoked with mutual agreement between the borrower and the lender. Any changes to the terms of the promissory note, such as altering the repayment schedule or canceling the loan, must be documented in writing. Additionally, both parties should sign the amended document to confirm their consent.

If the promissory note is replaced or canceled, it is important to create a new repayment agreement in Illinois to outline the updated terms. This ensures that both parties are legally protected and that the changes are clear and enforceable in court if necessary.