New York Promissory Note
New York voids a usurious loan outright. A personal loan above 16 percent a year is void, which means the lender can lose the principal as well as the interest. A note that is clean on its face also gets a fast track in court, because New York lets a lender move for summary judgment in place of filing a complaint.
What New York law does to this document
Civil usury ceiling of 16 percent
The maximum rate of interest on a loan is 16 percent per year. A note that reserves more than that is void, and a court will declare it void and bar collection. The borrower owes neither the interest nor the principal.
N.Y. Gen. Oblig. Law §§ 5-501, 5-511; N.Y. Banking Law § 14-aCriminal usury above 25 percent
Knowingly charging or taking interest on a loan at a rate above 25 percent per year is criminal usury in the second degree, a class E felony, unless a statute authorizes the rate. The rate is measured per year or at the equivalent rate for a longer or shorter period.
N.Y. Penal Law § 190.40Large loans and business borrowers
The 16 percent ceiling does not apply to a loan of $250,000 or more, unless it is secured primarily by a one or two family residence. Loans of $2,500,000 or more are also outside the criminal usury statutes. A corporation or limited liability company generally may not raise civil usury as a defense, though it may raise criminal usury.
N.Y. Gen. Oblig. Law §§ 5-501(6), 5-521; N.Y. Ltd. Liab. Co. Law § 1104Compound interest on smaller loans
A New York statute makes a loan agreement providing for compound interest enforceable. That statute does not apply when the original principal is $250,000 or less, or when the loan is secured primarily by a one or two family owner-occupied residence. Most personal notes are below that line, so simple interest is the safer choice.
N.Y. Gen. Oblig. Law § 5-527Six years to sue, or three for a consumer loan
The general period for an action on a contract, a note included, is six years. An action arising out of a consumer credit transaction in which the borrower is the defendant must be brought within three years, and the statute defines that as credit extended to an individual primarily for personal, family or household purposes. Its text is not limited to commercial lenders. For a demand instrument, the claim accrues on its date or, if it is undated, on the date of issue.
N.Y. C.P.L.R. 213(2), 214-i, 105(f); N.Y. U.C.C. § 3-122(1)A fast track to judgment
When an action is based on an instrument for the payment of money only, the lender may serve a motion for summary judgment with the summons in place of a complaint. After judgment, interest runs at nine percent per year, or two percent where the judgment arises from consumer debt and the defendant is a natural person.
N.Y. C.P.L.R. 3213, 5004Where people go wrong in New York
- Relying on the generator to police the rate: it accepts any interest rate, compounding choice and default rate that is entered and adds a usury savings clause, but it does not check the figures against New York's 16 percent ceiling, and a note under $250,000 that exceeds the ceiling is void under General Obligations Law § 5-511.
- Treating a demand note as open-ended, when the limitations period can begin on the date of the note and may be three years, not six, for a loan made for personal, family or household purposes.
- Taking a co-signer's promise orally, when General Obligations Law § 5-701(a)(2) requires a promise to answer for another person's debt to be in writing and signed.
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 New York already set as the governing state. Download it as PDF or Word. No fee. No account.