Arizona Promissory Note Law

By Christina Eichelkraut
Promissory notes, Arizona, specific state laws, interest rates

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A promissory note, or a contract between a lender and a borrower, must conform to Arizona state laws that regulate the amount of interest that can be charged on the loan, or usury laws, as well as the state's statute of limitations, or the length of time the contract can be enforced.

General Guidelines

Most promissory notes issued in Arizona will fall under the category of negotiable instruments. The laws for negotiable instruments can be found under Title 47 of the Uniform Commercial Code of Arizona state law. Like promissory notes nationwide, those written in Arizona must contain basic information about both parties, the exact amount of the loan and clearly stated terms of repayment.

Arizona Interest and Usury Laws

It is illegal to charge too much interest on a promissory note. The general maximum amount of interest allowed in Arizona is 10 percent per year, according to FindLaw.com's "Arizona Interest Law." Charging in excess of this amount is usury. According to state law, if the amount of interest is not clearly delineated in the promissory note, it will be determined by a court and due at that rate from the date the note was issued. Arizona allows for both fixed and variable interest rates to be charged.

Statute of Limitations

A promissory note is enforceable for up to 6 years after the due date of the payment, according to Arizona state law. If no action has been taken to collect payment prior to 6 years, the statute of limitations has run out and the contract can no longer be enforced through legal action.

Payment on Demand and Acceleration Clauses

Arizona law considers a promissory note payable on demand (i.e., whenever the lender demands payment of the full amount due or still owing) if the note states that it is or, alternately, does not actually give a specific time that payment is due. For example, if the borrower has agreed to pay $10 a month, but the note is payable on demand, the lender can demand the full amount borrowed to be paid immediately or by any date the lender sets for any reason.

Acceleration clauses, which state that the lender can demand full payment at any time under specific conditions, are legal in Arizona and may be included in any promissory note. An example of an acceleration clause is the condition that if the borrower misses one payment, then the entire amount of the loan is due immediately.

Acceleration clauses can only be enforced or acted upon when a specific condition is met, whereas a note being simply payable on demand is just that--payment can be demanded at any time for any reason at the discretion of the lender.

Considerations

Although promissory note forms can be easily purchased from office supply stores, be sure to check and see if the particular form being purchased is in compliance with Arizona state laws specifically.

About the Author

Christina Eichelkruat has a degree in mass communications, emphasis on print journalism. She has been a staff reporter for the "Pahrump Valley Times" for two years and a freelance writer for three. In addition to her published newspaper articles, she has ghostwritten two books and contributed to various governmental reports.

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