Illinois Secured Promissory Note Overview
A secured promissory note in Illinois is a loan agreement where the borrower pledges specific collateral to guarantee repayment. Illinois law governs the creation, perfection, and enforcement of security interests under the Uniform Commercial Code (UCC) as adopted by the state. The maximum interest rate for most loans in Illinois is 9%.
9% per annum general cap; no limit for business loans over $5,000 or commercial transactions. Lenders should verify that the agreed-upon interest rate complies with Illinois's usury laws before finalizing the note. Charging interest above the legal limit can result in severe penalties, including forfeiture of interest and potential civil liability.
For secured notes involving real property in Illinois, judicial foreclosure applies. Understanding your state's foreclosure process is critical because it determines the timeline, costs, and lender's rights in the event of borrower default.
9%
Usury rate cap
Secretary of State
UCC filing office
Judicial
Foreclosure type
Yes
Deficiency judgment
Illinois Legal Requirements
Illinois has specific requirements for secured promissory notes. Here's what you need to ensure your note is enforceable under IL law:
Important: Illinois Usury Laws
Illinois's maximum interest rate is 9%. 9% per annum general cap; no limit for business loans over $5,000 or commercial transactions. Exceeding the legal limit may void the interest portion of your note or result in civil penalties.
Essential Elements
- Written Agreement: The note must be in writing, signed by the borrower, and clearly state the loan terms
- Compliant Interest Rate: Must not exceed Illinois's 9% usury cap
- Collateral Description: Specific, identifiable description of all pledged property
- Security Agreement: Grant of security interest signed by the borrower (debtor)
- UCC-1 Filing: Filed with the Secretary of State, UCC Division for personal property collateral
- Default Provisions: Clear events of default, cure periods, and remedies including foreclosure/repossession rights
UCC Filing in Illinois
To perfect a security interest in personal property in Illinois, the lender must file a UCC-1 financing statement with the Secretary of State, UCC Division. This public filing puts other creditors on notice and establishes the lender's priority in the collateral.
Prepare the UCC-1 Form
Include the debtor's exact legal name, secured party name, and detailed collateral description
File with the Secretary of State
Submit online or by mail with the required filing fee
Monitor and Renew
UCC-1 filings last 5 years; file a continuation statement before expiration
Terminate After Payoff
File a UCC-3 termination statement when the loan is fully repaid
Illinois Foreclosure & Repossession
Illinois uses judicial foreclosure for real property collateral. For personal property (vehicles, equipment, inventory), the lender generally has the right to repossess the collateral without court action, provided it can be done without breaching the peace.
Regarding deficiency judgments in Illinois: Yes. The lender must follow Illinois's specific procedures for disposing of collateral in a commercially reasonable manner, providing proper notice to the borrower before any sale.
| Aspect | Illinois Rule |
|---|---|
| Foreclosure Type | Judicial |
| Deficiency Judgment | Yes |
| Statute of Limitations | 5 years (oral), 10 years (written contracts) |
| Usury Rate | 9% |
| UCC Filing Office | Secretary of State, UCC Division |
Sample Illinois Secured Promissory Note
Below is a preview of our Illinois-specific secured promissory note. Your customized document will include all terms compliant with IL law.
STATE OF ILLINOIS
SECURED PROMISSORY NOTE
Collateral-Backed Loan Agreement
LENDER (Secured Party):
Name: [Lender Name]
Address: [Illinois Address]
BORROWER (Debtor):
Name: [Borrower Name]
Address: [Illinois Address]
LOAN TERMS
Principal: $[Amount]
Interest: [Rate]% per annum (max 9% in IL)
Collateral: [Description]
Illinois Secured Promissory Note FAQ
Answers to common questions about secured promissory notes, UCC filings, and collateral requirements in Illinois.
Official Illinois Resources
Use these official resources to verify Illinois requirements, file UCC documents, and access state legal information.
Other Illinois Promissory Note Types
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