Illinois Promissory Note
For a loan between individuals, the Illinois Interest Act caps the rate a written contract can set at 9% a year unless an exemption applies. A lender who knowingly charges more can be made to give back twice the interest, and knowingly charging an individual more than 20% a year is criminal usury. A note that says nothing about interest earns 5% a year once the money is due.
What Illinois law does to this document
The 9% ceiling and the 5% default
Parties to a written contract may agree on an annual percentage rate of 9% or less. The maximum is fixed by the law in force when the contract is made. Where the parties have not agreed on a rate, a creditor is allowed 5% a year on money after it becomes due on a promissory note or other written instrument.
815 ILCS 205/2 and 205/4(1)Loans exempt from the ceiling
The Interest Act allows any rate on certain transactions. They include a loan made to a corporation, a business loan to a business association or to a person who owns and operates a business as a sole proprietor, and a loan secured by a mortgage on real estate. The Act defines a business as a commercial, agricultural or industrial enterprise carried on for investment or profit, so a typical personal loan between two people stays under the 9% ceiling.
815 ILCS 205/4(1)(a), (c) and (l)The penalty for charging too much
If a lender knowingly contracts for or receives unlawful interest, the borrower may recover twice the total of all interest and charges set by the loan contract or actually paid, whichever is greater, plus attorney's fees and court costs. The borrower can raise this as a defense at any time, or sue within 2 years after the last scheduled payment date or the date the loan is paid in full, whichever is earlier. A bona fide error that the lender corrects within a reasonable time is not a violation.
815 ILCS 205/6Criminal usury above 20%
A person commits criminal usury by knowingly contracting for or receiving interest from an individual at a rate greater than 20% a year. The offense is a Class 4 felony. It does not apply to loans the Interest Act permits or to licensed lenders making loans their licenses authorize.
720 ILCS 5/17-59Ten years to sue on the note
An action on a promissory note must be commenced within 10 years after the cause of action accrues. For a note payable at a definite date, that is the due date or the date the note is accelerated. For a demand note, suit must be filed within 10 years after demand, and the claim is barred if no principal or interest has been paid for 10 continuous years and no demand has been made. The section was last amended effective August 21, 2026.
735 ILCS 5/13-206Federal: interest-free and low-interest loans
This point is federal tax law. A loan that charges less than the applicable federal rate can be treated as a below-market loan with imputed interest. Gift loans between individuals are excepted on any day the total outstanding between them is $10,000 or less, unless the loan is tied to buying income-producing assets. The IRS has set the annual gift tax exclusion for 2026 at $19,000.
26 U.S.C. 7872(c)(2) and (e); IRS, Frequently Asked Questions on Gift TaxesWhere people go wrong in Illinois
- Entering a rate above 9% on a personal loan because the borrower agreed to it, when the generator accepts any interest rate and default rate and the Illinois ceiling applies to written contracts unless a statutory exemption fits.
- Taking a car as collateral without delivering the title and a title application naming the lender as lienholder to the Secretary of State, which is how a security interest in a titled vehicle is perfected under 625 ILCS 5/3-202.
- Relying on a co-signer's spoken promise, when a promise to answer for another person's debt must be in writing and signed by the person to be charged under 740 ILCS 80/1.
How the generator works
A clear, enforceable IOU between two people, with optional interest, a repayment schedule, and current security and default terms. Answer a short interview and the draft assembles as you go, with Illinois already set as the governing state. Download it as PDF or Word. No fee. No account.