Free Iowa Promissory Note Template

An Iowa promissory note is a signed, written promise to repay money on agreed terms. Iowa’s ceiling isn’t a fixed number. Instead, the superintendent of banking publishes a maximum lawful rate every month. A rate that was lawful when you signed then stays lawful for the life of the note.

Chapter 535 of the Iowa Code covers money and interest. Several of its sections shape a note.

5% Without a Written Agreement

Section 535.2(1) sets the rate at five cents on the hundred by the year. It reaches money loaned, money due by express contract, and money after it becomes due. However, it yields to a written agreement within the limit described next.

The Monthly Maximum

For written agreements, § 535.2(3)(a) starts from the monthly average ten-year constant maturity rate on United States government notes and bonds. The maximum is two percentage points above that, rounded to the nearest one-quarter percent. The figure comes from the second month before the one in which the rate takes effect. Each month, by the twentieth, the superintendent of banking determines the coming month’s rate and publishes it.

A Rate That Stays Lawful

Once a rate is lawful, § 535.2(3)(b) keeps it lawful for the whole term, including extensions, renewals, and future advances. However, paragraph (3)(d) adds a condition for adjustable notes. Say a note can rise to a rate that would have been unlawful when it was made. Then it must also provide for reductions, worked out the same way and just as often.

Loans Outside the Cap

Section 535.2(2)(a) lets certain borrowers agree in writing to any rate, and they can’t then plead usury:

• Someone borrowing to acquire real property or refinance a contract for deed
• A vendee under a contract for deed
• A corporation, a real estate investment trust, or someone buying securities on credit from a registered broker
• Someone borrowing for business or agricultural purposes
• Someone borrowing above the threshold amount in § 537.1301 for personal, family, or household purposes

For these tests, paragraph (2)(b) says the purpose is where a majority of the loan proceeds go.

Copies at Signing

Under § 535.16, a lender or other secured party must hand the debtor a copy of each document the debtor signs. That happens at the time of signing. Later copies must also be provided on request for no more than reasonable copying costs.

Prepayment on a Home Purchase Loan

Where the loan is used to buy a one- or two-family dwelling the borrower occupies, § 535.9 bars any prepayment penalty. A lender may still require up to thirty days’ notice of intent to repay the whole balance.

The lender loses interest and pays the state. Section 535.4 bars anyone from receiving more for a loan than the chapter allows, and § 535.5 sets out what follows.

In an action on the contract, an unlawful rate works a forfeiture. That forfeiture runs at eight cents on the hundred by the year on the principal still unpaid at judgment. The court enters judgment for the plaintiff for that unpaid principal without costs. Meanwhile, the forfeiture goes to the treasurer of state for the general fund. Where unlawful interest was contracted for, the plaintiff cannot get judgment for more than the principal.

One more party has a remedy. Section 535.7 covers an assignee who took a usurious contract in good faith, in the usual course of business and without notice. That assignee may recover the full consideration paid from the usurer, less anything realized on the contract.

Tip: Check the published maximum for the month you sign, not the month you agreed in principle. Your Iowa promissory note is measured against the rate in force on its own date.

Timing and purpose drive the paperwork here. Work through these steps:

1. Identify the loan’s purpose, since business, agricultural, and real-property borrowing sits outside the cap.
2. For a capped loan, look up the maximum lawful rate published for your signing month.
3. Write the annual rate into the note, and date it.
4. If the rate can adjust upward, include the matching downward adjustment.
5. Have the borrower and any cosigner sign, then hand each party a copy right away.
6. Keep a record of every payment and how much went to interest.

The usual terms apply, with the date and purpose carrying extra weight.

• Lender and borrower names and addresses
• Loan purpose
• Principal amount
• Annual interest rate, in writing
• Date of signing
• Payment schedule and due date
• Any rate adjustment terms, up and down
• Prepayment terms
• Signatures

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