Tennessee Promissory Note Template [PDF + Download]

A Tennessee promissory note is a legally binding promise by a borrower to repay the lender's debt. The promissory note's meaning is straightforward—it’s a contract outlining the terms for borrowing money and determining how the borrower will pay back the funds.

While you can use promissory notes independently, you can also secure Tennessee loan agreements by pairing up the two documents. Hiring a lawyer for this legal document is not required in this state but is recommended.

To help you speed up the document creation process, we share and discuss details like promissory note types, signing requirements, interest rates, enforcement, and revocation. This can help you understand promissory note templates and create documents that will meet your standards.

Types of Promissory Notes in Tennessee

Broadly speaking, you can use two types of Tennessee promissory notes—secured and unsecured. Both variants are legally binding and enforceable but in different ways.

Let us examine how each type works:

Types of Promissory Notes

#1. Unsecured Promissory Note

An unsecured promissory note is solely based on a borrower’s promise to repay the debt to a lender, with or without an interest rate (as specified in a Tennessee repayment agreement made by two parties) and does not contain collateral.

Specifically, collateral is a borrower’s asset or property that a lender can use in case of a default. Therefore, if a borrower is late on payments or fails to make payments, a lender will have to file a claim in small court and seek recovery.

#2. Secured Promissory Note

A secured promissory note obliges a borrower to pay off the debt while allowing a lender to compensate for the loan by claiming collateral on default occasions. Collaterals in Tennessee debt agreements typically involve properties like houses and assets like vehicles.

Moreover, secured promissory notes must provide detailed collateral descriptions, including registration or identification numbers. Also, the borrower must have legal title to the asset or piece of property they use as collateral.

Signing Requirements for Promissory Notes in Tennessee

To avoid any accidental fraudulent schemes, parties must fulfill the promissory note Tennessee requirements.

These are the following:

Signing Requirements

Creating a note in written form is mandatory.
Stating parties’ names, addresses, and contact details is mandatory.
Promissory notes must specify the loan amount, reimbursement terms, and interest rates.
Penalties for late or no payments must be defined, including collaterals for secured notes.

In most states, including Tennessee, only a lender and a borrower must sign promissory notes to bind them legally. However, witnesses can sign and further fortify such documents. Likewise, parties don’t have to notarize promissory notes but can nonetheless do that just to be on the safe side, especially for loans exceeding several thousand dollars.

Statutory Considerations for Tennessee Promissory Notes

Lenders should be aware of the maximum interest rates proposed in Title 47, Chapter 3 of the TN Code for the creation and implementation of promissory notes to prevent penalties or interest rate annulment.

Tennessee promissory notes can encompass personal, business, real estate, and other types of loans, subject to the following limitations:

Statutory Considerations

No contract: As per § 47-14-103(3), the maximum interest rate is 10% per year.
Small single-payment loans (1 year or less): The interest rate is capped at 10% for loans of $10,000 or less.
Home loans: The maximum interest rate is 18% per year, with a ceiling of 2% above the most recent rate set by the Federal National Mortgage Association.
Government-issued contracts: The interest rate is limited to 7.50%.

It’s important to say that the maximum rate is subject to change and is updated and published in the Tennessee Administrative Register on the 1st of each month.

How to Enforce a Promissory Note in Tennessee

To enforce a promissory note in Tennessee, a lender may take and sell a borrower’s property or file small court claims, depending on the stipulations.

Specifically, a lender with a secured note has the legal grounds to use collateral to recoup the debt. This process may take a while, especially if the borrower decides to dispute the default. If the lender wins, the borrower may have to pay the court fees for the procedures included.

As an unsecured enforceable promissory note in Tennessee does not imply collateral, a lender must file a suit in small court. The maximum loan amount for a small court case in this state is $25,000.

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

A promissory note in Tennessee can be changed or revoked if both a lender and a borrower permit such alterations. The two parties must settle upon the terms of revocation or the new promissory note terms, then create an agreement in writing and sign it.

The most common changes in promissory notes relate to repayment schedules, interest rates, collateral, and deadlines. In addition to the new terms, a promissory note should also reference the original note.

It is recommended that inexperienced individuals examine existing promissory note samples or appoint a professional to avoid making errors that could invalidate the note.