North Dakota Promissory Note Template [PDF + Download]

A promissory note is a legal document that records the borrower's promise to repay a loan. It is an essential tool for documenting a loan agreement in North Dakota, as it provides clarity and ensures legal enforceability by including vital elements such as the loan amount, repayment terms, interest rate, and penalties for default.

In this regard, using a promissory note sample or consulting an attorney can help ensure the document is complete and legally valid.

Let's explore the meaning of promissory notes, as well as their types and key elements, to understand better their role in documenting loan agreements.

Types of Promissory Notes in North Dakota

All promissory notes are based on the repayment terms, but what differentiates them are the additional conditions and terms included in the agreement. The most common division of the promissory notes is into secured and unsecured types.

Types of Promissory Notes

#1. Secured Promissory Notes

In addition to the basic repayment details, a secured promissory note includes information about collateral— assets pledged by the borrower as security for the loan. These assets must be detailed, including their description, value, and ownership, so the lender can claim them if the borrower defaults on the loan.

This type protects the lender by ensuring they can recover the debt through the collateral if necessary.

#2. Unsecured Promissory Notes

An unsecured promissory note is the most basic type, issued without collateral. In this case, the lender relies solely on the borrower's promise to repay the loan. Since no collateral backs the loan, the lender faces a greater risk of default if the borrower cannot or doesn’t repay.

If the borrower defaults, the lender may need to pursue legal action to recover the debt. Still, there is no guarantee that the debt will be repaid.

Signing Requirements for Promissory Notes in North Dakota

The requirements for a legally valid promissory note typically include the following:

Signing Requirements

A promissory note must be created in written form to be legally binding.
The note should identify the borrower, lender, and any co-signer (if applicable).
All essential information from the North Dakota debt agreement should be included in the note, such as the loan amount, repayment terms, interest rate, payment methods, and late payment penalties.
The borrower and lender must sign the document.

These elements ensure that the promissory note is legally binding and enforceable. However, it is advisable to use a promissory note template as a starting point and customize it to reflect the details of your agreement.

Additionally, having the promissory note witnessed and notarized adds a layer of legal validity and ensures its credibility and enforceability in court if needed.

Statutory Considerations for North Dakota Promissory Notes

When creating a promissory note in North Dakota, it’s essential to comply with state laws that govern interest rates and other terms. North Dakota’s usury laws regulate interest rates to ensure they remain fair.

For example, according to Section 47-14-09 of the North Dakota Century Code, for agreements with a contract, the maximum allowable interest rate is set to 6-month US Treasury Bills + 5,5%, but it cannot be lower than 7%. The exceptions are loans over $35,000 and transactions with licensed pawnbrokers.

Section 47-14-05 states that the interest rate for loans without a contract is capped at 6%, while Section 28-20-34 specifies that the interest rate for monetary judgments is the prime rate + 3% unless otherwise stated in the agreement.

It’s always advisable to review state laws to ensure that the document meets the North Dakota promissory note requirements and is, thus, valid.

How To Enforce a Promissory Note in North Dakota

To enforce a promissory note in North Dakota, when a borrower defaults, the lender should attempt to resolve the issue amicably by contacting the borrower and discussing repayment options. If this doesn’t work, they should send a formal demand letter requesting payment by a specific deadline.

If the borrower still fails to pay, the lender may need to file a lawsuit. For claims up to $15,000, the lender can file in North Dakota’s Small Claims Court, which is designed to be less formal and doesn’t require an attorney. For amounts over $15,000, the lender would need to file in district court, where the process is more formal.

In North Dakota, the statute of limitations for enforcing a promissory note is six years from the date of default, so it’s important to take action within that period.

Once the lender obtains a judgment from the court, they can begin collecting the debt. This can include wage garnishment, bank account levies, or placing a lien on the borrower’s property. If the enforceable promissory note in North Dakota was secured with collateral, the lender may also be able to seize and sell it to satisfy the debt.

How Can a Promissory Note in North Dakota Be Changed or Revoked?

A promissory note in North Dakota can be changed or revoked with mutual agreement between both parties. To ensure that the modifications are legally enforceable, it’s important to:

Document the changes in writing. Clearly state the amendments or the decision to cancel the agreement.
Obtain signatures from all involved parties. This confirms mutual consent to revised or canceled terms.

By following these steps, both parties can ensure their intentions are clearly recorded, and that the revised repayment agreement in North Dakota is legally valid.