A promissory note is a written agreement to pay back money in a certain time with specific terms and is often used in real estate, vehicle, personal and college loans. Colorado, like many states, has a number of requirements needed for a promissory note to be legal.
A legally binding promissory note in Colorado must include the names of the borrower and lender. Both sides must sign and date the agreement. It also must contain the amount and the time frame for repayment. If the promissory note is missing any of these items it is possible it will not be upheld in a court of law.
A borrower or lender will also have problems with a promissory note if the interest rate is beyond what is allowed by law. According to Colorado's Consumer Protection Laws, you can't charge more than 45 percent interest. If no interest rate is specified, Colorado law puts the rate at 8 percent annually.
In 2010, Colorado Law stated if you are the lender on a promissory note, you must collect or file notice to collect on a defaulted promissory note within six years of signing it or you will lose your right to repayment. And if a borrower dies before repaying the note, the spouse or heir is still responsible for repayment.
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