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A promissory note in Mississippi is a written agreement in which the borrower commits to repaying the lender a specified amount, according to the agreed terms. It formalizes a loan agreement in Mississippi by clearly outlining the essential elements of the loan transaction.
This way, parties have a valid document of a transaction that can be used for legal enforcement in any disputes that arise.
While a lawyer is not required to create a document, consulting one ensures that the document includes all necessary provisions and safeguards. Alternatively, you can use promissory note templates and tailor them to your specific loan agreement.
Types of Promissory Notes in Mississippi
There are two main types of promissory notes, depending on the specific terms and conditions of the agreement. Let's explore each of them in detail:
Types of Promissory Notes
#1. Secured Promissory Notes
A secured promissory note includes all the regular terms of the note but with the added obligation of the borrower to the lender in the form of collateral.
In this type, the borrower promises to repay the loan and backs this promise with an asset. This way, the lender can seize the collateral if the borrower fails to make payments on time.
Due to the collateral, the interest rate may be lower, as the lender has a guaranteed recourse in case of default.
#2. Unsecured Promissory Notes
An unsecured promissory note obligates the borrower to repay the debt without collateral backing the promise. In this case, the lender must rely solely on the borrower's promise to repay.
Since there is no collateral, the lender has fewer guarantees of repayment, and in case of default, legal proceedings can take longer. Because of the higher risk, lenders often charge higher interest rates for unsecured loans.
Signing Requirements for Promissory Notes in Mississippi
A promissory note in Mississippi must meet several requirements to be legally valid and enforceable. Here are the essential ones:
Signing Requirements
The promissory note must be documented in written form.
The document should include the identification data of the parties, including legal names and contact information.
It must incorporate vital elements of the Mississippi debt agreement, such as the loan amount, due date, payment methods, and interest rate.
A signature from the borrower is required to confirm their agreement to repay the loan.
While witnessing or notarization is not mandatory, adding these elements can provide extra legal protection, which is especially useful when larger loan amounts are involved.
Using a promissory note sample is also recommended, as it ensures that all required elements are included clearly and correctly.
Statutory Considerations for Mississippi Promissory Notes
Valid and enforceable promissory note in Mississippi requires compliance with state laws, including usury regulations that cap the interest rates lenders can charge. Promissory notes can be used for various purposes, including personal loans, business financing, and consumer credit. In any case, the parties must adhere to promissory note Mississippi requirements in the promissory note in order to ensure the document’s validity. Below is a table summarizing Mississippi’s usury laws, which should be carefully reviewed when drafting a promissory note:
Loan Type | Maximum Interest Rate | Relevant Code |
With a Contract | 10% per annum or 5% above the Federal Reserve rate (whichever is greater) | |
Without a Contract | 8% per annum | Section 75-17-1(1) |
Judgments | As stated in the contract or as determined by the judge | |
Business Entities & Religious Societies | 15%, or 5% above the 90-day commercial paper rate (over $2,500) | Section 75-17-1(3) |
Consumer Loans (under $5,100) | Up to 59% APR | |
Installment Loans | 7% per annum | |
Pawnbrokers | 25% per month | |
Tax Bonds | 11% per annum | |
Revenue Bonds | 13% per annum |
How To Enforce a Promissory Note in Mississippi
To enforce a promissory note in Mississippi, if a borrower defaults on it, the lender first has to ensure the promissory note is valid and enforceable under Mississippi law, meaning it contains necessary elements. Once this is confirmed, the lender should issue a formal demand letter to the borrower, requesting immediate payment.
If the borrower fails to respond, the lender can file a lawsuit to recover the owed amount. Mississippi’s small claims court handles cases for amounts up to $3,500, which is a quicker and more affordable option for enforcing smaller debts. In court, the lender must present evidence to prove the debt, and if successful, the judge will issue a judgment confirming the borrower’s obligation to repay.
Section 15-1-81 of the Mississippi Code states that any action to enforce a nonnegotiable promissory note payable at a definite time must be filed within six years after the due date or within six years after an accelerated due date. Failing to act in this time frame could lead to losing the right to collect the debt.
The enforcement process may differ depending on whether the promissory note is secured or unsecured. A secured promissory note allows the lender to seize collateral if the borrower defaults. On the other hand, since an unsecured note does not include collateral, the lender must obtain a court judgment to pursue wage garnishment or property liens.
How Can a Promissory Note in Mississippi Be Changed or Revoked?
A promissory note in Mississippi can be changed or revoked if both parties agree to the changes. This mutual agreement is crucial for altering key terms, such as the repayment schedule, interest rate, or loan amount. To ensure these changes are legally binding, it’s important to document them through a new repayment agreement in Mississippi.
Mississippi law recognizes the importance of having any modifications made in writing and signed by both the lender and borrower. A verbal agreement may not hold up in court, so a clear, written document protects both parties and helps them avoid future disputes.