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California Promissory Note PDF
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California at a glance: Usury Limit: 10% per year (for personal/consumer loans) · Notarization Required: No (recommended for enforcement) · Governing Law: Cal. Civ. Code § 1916-1 et seq.
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Overview
Promissory Notes in California
California promissory notes are governed by the California Civil Code and the California Constitution (Article XV, Section 1), which establishes a strict usury limit of 10% per year for personal, consumer-purpose loans. Certain licensed lenders (such as banks, credit unions, and pawnshops) are exempt from this usury cap.
Under California law, if a lender charges a rate that violates the usury cap, the interest provision is void, and the lender may only recover the principal amount borrowed.
Key Facts
California Promissory Note — Quick Reference
| Requirement | California Rule |
|---|---|
| Usury Limit | 10% per year (for personal/consumer loans) |
| Notarization Required | No (recommended for enforcement) |
| Governing Law | Cal. Civ. Code § 1916-1 et seq. |
| Late Fee Cap | Must be reasonable (liquidated damages rules apply) |
Legal Requirements
California Legal Requirements
- Interest rate must not exceed 10% per year for non-exempt consumer loans.
- Late fees must represent a reasonable forecast of the lender's actual damages (Cal. Civ. Code § 1671).
- Borrower's signature is mandatory; co-signer signature is required if backing the loan.
- Note must clearly state the principal, interest rate, and payment schedule.
Governing Laws
California Governing Laws
Cal. Const. Art. XV § 1
Usury Interest Limits
Caps interest rates at 10% per year for personal loans, with exemptions for real estate brokers and licensed financial institutions.
Cal. Civ. Code § 1671
Liquidated Damages (Late Fees)
Requires late fees and pre-determined penalties to be reasonable and reflective of actual administrative damages.
Read the full text of these laws at Cornell Law School's California legal resources or your state legislature's official website.
Questions & Answers
California Promissory Note — Frequently Asked Questions
What is the maximum interest rate I can charge in California?
Under the California Constitution, the maximum interest rate for personal, family, or household loans is 10% per year. Charging more violates state usury laws.
What happens if a California promissory note violates usury laws?
If the interest rate exceeds the 10% limit, the interest provision is legally void. The lender can only collect the principal amount of the loan, and any interest already paid may be deducted from the principal.
Does a California promissory note need to be notarized?
No, notarization is not legally required for validity, but it is highly recommended to prevent the borrower from claiming they did not sign the document.