Promissory Note requirements in California
- Must be in writing and signed by the borrower.
- Include the loan amount, interest rate (if any), repayment schedule, and due date.
- For real estate loans, a witnessed signature is required (Civil Code § 1180).
- Notarization is not required for most promissory notes, but it helps prove authenticity.
- For loans over $100,000, consider consulting a lawyer to comply with usury laws (maximum interest rate).
- Keep the original note and a copy for your records; file a UCC-1 if secured by personal property.
The process in California
- Start with a promissory note template tailored to California law.
- Fill in the parties' full names and addresses, and the loan principal amount.
- Specify the interest rate and ensure it complies with California's usury limit (typically 10% for personal loans).
- Outline repayment terms: installments or lump sum, and due dates.
- Add a late fee clause if desired, but keep it reasonable (typically 5% of the overdue payment).
- Both parties sign, and if possible, have a witness or notary sign to strengthen enforceability.
Get your free California promissory note template now and ensure your loan is protected.
Create your promissory noteBudgeting for a Promissory Note
Creating a promissory note yourself is free using templates. Notarization typically costs $10–$20 per signature in California. If you hire a lawyer to draft a custom note, expect to pay $200–$500 or more.
Before You Start: CA Promissory Note Checklist
Prepare these items to ensure your California promissory note is legally sound, enforceable, and meets state-specific requirements.
- Confirm all parties' full legal names and contact info—avoid nicknames or initials.
- Clarify the loan amount, interest rate (be aware of California usury limits), and repayment schedule (balloon, installment, due-on-demand).
- Decide on collateral (if any) and include a clear description; otherwise, the note is unsecured.
- Know that California does not generally require notarization for a valid promissory note, but notarizing the signature helps prove authenticity and may be required for recording a mortgage or deed of trust.
- If the note is secured by real property, check with the county recorder's office for recording requirements and fees; if unsecured, you may still file a UCC-1 with the California Secretary of State to perfect a security interest in personal property.
- Have two witnesses or a notary available if you want extra evidentiary weight, though not required by state law for most notes.
- Be aware of California's statute of limitations for enforcing a written note (typically 4 years) and consider adding a choice-of-law clause.
FAQs
Is a promissory note in California required to be notarized?
No, notarization is not required for most promissory notes in California. However, for loans secured by real estate, a witness signature is required, and notarization can help prove the signature's validity.
What is the maximum interest rate for a promissory note in California?
For personal loans, the general usury limit is 10% per year. Exceptions exist for loans over $300,000 or certain institutional lenders. Consult a lawyer or check California Civil Code § 1916-1 for details.
Can I use a promissory note for a loan between family members?
Yes. A promissory note is a good idea for family loans to avoid disputes. It should clearly state the terms, including repayment schedule and interest, to avoid IRS imputed interest issues.