Free Colorado Promissory Note Template

A Colorado promissory note is a signed, written promise to repay a loan on set terms. Colorado lets the parties write in a rate well above its 8% baseline. However, 45% a year is the outer edge, and every charge counts toward that figure.

Article 12 of Title 5 of the Colorado Revised Statutes covers interest. For a note, § 5-12-103 does most of the work.

The Rate Belongs in the Writing

Section 5-12-103(1) covers any bond, bill, promissory note, or other instrument of writing. In one, the parties may stipulate a rate higher than 8% a year, but not above 45%. Then that stipulation can be enforced in any Colorado court, except as articles 1 to 6 of the title provide.

Every Charge Counts as Interest

Subsection (2) defines interest broadly. It covers every charge the debtor pays, directly or indirectly, that the lender imposes as a condition of the credit. So it holds whether the charge goes to the lender or to a third party.

Interest on Interest

Subsection (3) says the state’s public policy doesn’t bar agreeing in advance to compound interest. Moreover, subsection (4) exempts notes secured by a mortgage or deed of trust. Laws limiting interest on interest, or the addition of deferred interest to principal, don’t reach them.

Consumer Loans Above 12%

Meanwhile, the Colorado Department of Law treats a consumer loan with a finance charge above 12% a year as a supervised loan. Anyone who makes, services, or takes assignment of supervised loans needs a Supervised Lender’s License. Check with its Consumer Credit Unit before charging a consumer more than 12%.

Commercial Credit Plans

Finally, subsection (5) says the section doesn’t reach a commercial credit plan unless the written agreement says it does.

Forty-five percent a year, under § 5-12-103(1). The statute’s official commentary notes that this ceiling matches the usury limit in the state’s criminal code.

Working out whether a rate crosses the line has its own rule. The test is mathematical computation at the time of the stipulation. If that shows the rate topping 45% a year, it’s excessive. The figure is calculated on the unpaid balances, assuming the debt is paid on its terms rather than early. In 2019, the Colorado Supreme Court applied that test to a forbearance. It annualized the charge over the forbearance period, then added interest still running under the original loan.

Going over the limit doesn’t void the note. Instead, courts have held such a note invalid only as to the usurious portion. It is still enforced at the maximum allowable rate.

Tip: Add up every fee, not just the stated rate, before comparing your Colorado promissory note with the limit. Charges paid to a third party count too.

The arithmetic matters more than the paperwork here. Work through these steps:

1. Decide whether the loan is for consumer or business purposes.
2. For a consumer loan above 12%, check the licensing rules before going further.
3. Total the rate plus every fee and charge, then confirm the figure stays under 45%.
4. Write the rate and all charges into the note.
5. Date the note, and have the borrower and any cosigner sign.
6. Give each party a copy, and keep the original somewhere safe.

The usual terms apply. Even so, in Colorado the charges deserve the most attention.

• Lender and borrower names and addresses
• Loan purpose, consumer or business
• Principal amount
• Annual interest rate
• Every fee or charge, including any paid to a third party
• Whether interest compounds
• Payment schedule and due date
• Collateral or deed of trust details, if any
• Signatures and dates

Document Genius’s guided form walks you through each term, so your Colorado promissory note template is ready to download or e-sign in minutes.