Texas Promissory Note Template [PDF + Download]

A Texas promissory note is a legal document stating a borrower’s official promise to pay off the debt amount to a lender, with or without interest rates. It encompasses several stipulations, such as the loan amount, due dates, repayment terms, etc.

Promissory notes are legally binding in this region and can formalize Texas loan agreements, including real estate, personal, business, and other types of loans.

Read on to understand the exact meaning of promissory notes as we outline details on their types, statutory considerations, making amendments, and more.

Types of Promissory Notes in Texas

In Texas, there are two most commonly used promissory notes—secured and unsecured. Their usage usually depends on the loan amount, the borrower’s credit score, and the levels of trust between the lender and the borrower.

Let’s explore them in detail:

Types of Promissory Notes

#1. Secured Promissory Note

Secured promissory notes ensure special reimbursement security, as they include collateral. This means you can take a borrower’s property or asset to compensate for the debt amount stated in a Texas repayment agreement.

For instance, if you buy an apartment, it will be the collateral in your loan estate agreement. The lender (in this case, probably a bank) will have the legal right to take the apartment if you default on payment. The same rules apply to other loan types, such as personal loans.

#2. Unsecured Promissory Note

Unsecured promissory notes are also legally binding and enforceable but under different conditions. There’s no collateral in such notes and, therefore, no formal assurance in a Texas debt agreement that a borrower will pay back what they owe.

Alternatively, a lender can file a suit in small claims courts in the event of default. This legal action typically takes a considerable amount of time. Additionally, the main disadvantage of unsecured promissory notes is that lenders with secured interest will receive payments first if the borrower declares bankruptcy.

Signing Requirements for Promissory Notes in Texas

Texas promissory note signing requirements include mandatory elements that make this document effective.

Here they are:

Signing Requirements

The Texas promissory note must be in written form.
It must include information on the parties involved, such as names, addresses, and contact details.
The note should specify the repayment terms and schedule and potential penalties in case of default.
Both parties must sign the note for it to be valid.

Although involving a notary public is not obligatory for promissory notes in this state, notarizing this agreement reinforces its legality. The same applies to including witnesses' signatures.

Statutory Considerations for Texas Promissory Notes

Texas Business and Commerce Code § 26.02 laws protect borrowers from extreme interest rates in this state. All types of loans available in Texas (business, personal, real estate, and others) are covered in Title 4, Subtitle A (Interest), and include the following limits:

Type of Loan	Interest Rate
With a contract	10%
Without a contract	6%
Money judgments with a contract	18% per year or the amount stated in the contract (whichever is lower)
Usury ceiling for open-end account credit agreements	21%
Usury ceiling for credit extensions	28%
Periodic usury ceiling	18%
Post-judgment	If the rate published by the Board of Governors of the Federal Reserve System is between 5% and 15%, the federal prime rate limit applies; if the published rate is above 15%, the rate is 15%; and if the published rate is below 5%, the rate is 5%.

When providing loans using promissory notes, the lender is responsible for staying within the proposed interest rate limits. Any attempt to apply rates exceeding the maximum limit may void the agreement.

How To Enforce a Promissory Note in Texas

To enforce a promissory note in Texas, the lender must use a valid note and take legal action to claim a borrower’s property or asset or file a small claims court case for restitution.

Before taking legal action as a response to the borrower’s default, the lender must prove that:

Promissory Note Enforcement

The promissory note exists.
They are the note owners.
The borrower has signed the note.
The amount the borrower defaulted on is correct.

Once ready, the lender can use an enforceable promissory note in Texas and request a partial or full seizure of the borrower’s asset or property, depending on the amount owed. This is only applicable for secured promissory notes.

On the contrary, an unsecured noteholder can file a claim in small claims courts to enforce a financial obligation on the borrower. The maximum loan amount for small claims cases is $20,000.

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

A promissory note in Texas can be changed or revoked on the condition that both parties agree to these procedures. In other words, the original contract must be replaced with another contract in written form, and both parties must sign it.

Parties must not omit modified stipulations, such as interest rates, due dates, repayment terms, and similar. Creating clear clauses and avoiding vagueness is equally essential.

You can ask a professional for help or have an insight into well-formed promissory note samples to ensure no amendment is invalid. Additionally, well-versed parties can use Contract.net promissory note templates to create new notes with changes on their own.