Promissory Note requirements in Texas
- Include the amount of money loaned, in both numbers and written words.
- State the repayment terms: fixed amount, interest rate, due date, or installment schedule.
- Identify the borrower (maker) and lender (payee) by full legal names and addresses.
- Specify the interest rate and how it's calculated, if any. Texas has usury limits.
- Include a late fee clause if you plan to charge one, but keep it reasonable.
- Add a notary block. While not required, notarization strengthens the note's enforceability.
The process in Texas
- Start with a heading: 'Promissory Note' and the date.
- Write the promise: 'I, [borrower], promise to pay [lender] the sum of $[amount] on [date].'
- Detail the payment plan: lump sum, installments, or on-demand. State the due dates.
- Calculate the interest using a legal rate. For example, at 6% annual simple interest on a $1,000 loan for one year equals $60.
- Include default clauses: what happens if you're late, like a late fee of $25 or 5% of the overdue amount.
- Sign both parties, and consider having a witness or notary sign to add legal weight.
Download a free Texas promissory note template and fill it out with your loan details today.
Create your promissory noteBudgeting for a Promissory Note
Creating a promissory note in Texas is usually free if you write it yourself. Notarization costs between $6 and $10 per signature at a notary public. Filing a lawsuit to enforce the note involves court fees, which vary by county.
Texas Promissory Note: Before You Begin
Before drafting your Texas promissory note, gather key details and understand state-specific rules to ensure its enforceability.
- Identify the parties: full legal names and addresses of the lender and borrower.
- Determine the loan amount, interest rate (ensure it complies with Texas usury limits), and repayment schedule.
- Decide whether the note will be secured or unsecured; if secured, describe the collateral in detail.
- Have the borrower sign the note; for real estate-secured notes, consider having the signature notarized (not required for validity, but helps with recording).
- If the note is secured by real property, file it with the county clerk in the county where the property is located to perfect the lien.
- Keep a copy for your records and consider using a witness for written evidence, though not required by Texas law for most notes.
FAQs
Is a promissory note legal without a notary in Texas?
Yes, a promissory note is valid without a notary if both parties sign. However, notarizing makes it harder for a borrower to deny the debt in court.
What is the difference between a promissory note and an IOU?
An IOU merely acknowledges debt; a promissory note includes repayment terms, interest, and legal remedies. For most loans, use a promissory note.
How long do I have to enforce a promissory note in Texas?
The statute of limitations is typically 4 years for written contracts. But if the note is secured by real estate, it can be longer. Check with an attorney for details.
Do I need a witness for a promissory note in Texas?
No, a witness is not required by law, but it's recommended. A witness who is not involved in the loan can help prove the note's validity in court.