Illinois Unsecured Promissory Note Overview
An unsecured promissory note in Illinois is a loan agreement where the borrower promises to repay without pledging any collateral. The lender relies on the borrower's creditworthiness and the legally enforceable promise to pay. The maximum interest rate in Illinois is 9%.
9% per annum general cap; no limit for business loans over $5,000. Unsecured notes carry more risk for the lender, so interest rates are typically higher than secured notes. However, the rate must still comply with Illinois's usury laws.
If the borrower defaults, the lender's primary remedy is filing a lawsuit within Illinois's statute of limitations (5 years (oral), 10 years (written)). The small claims court limit in Illinois is $10,000, which is ideal for smaller unsecured loans.
9%
Usury rate cap
5 years
Statute of limitations
$10,000
Small claims limit
25%
Max garnishment
Illinois Legal Requirements
Illinois has specific requirements for unsecured promissory notes:
Important: Illinois Usury Laws
Illinois's maximum interest rate is 9%. 9% per annum general cap; no limit for business loans over $5,000. Exceeding this limit may void the interest or result in penalties.
- Written Agreement: Must be in writing, signed by borrower, clearly stating loan terms
- Compliant Interest Rate: Must not exceed Illinois's 9% usury cap
- No Collateral Statement: Explicitly state that the note is unsecured with no collateral pledged
- Default Provisions: Events of default, cure period, acceleration clause, and collection remedies
- Personal Guarantee: Recommended for business borrowers to protect the lender
- Governing Law: Specify Illinois law as the governing jurisdiction
Collection Remedies in Illinois
If a borrower defaults on an unsecured promissory note in Illinois, the lender has several collection options:
Send a Formal Demand Letter
Written notice demanding payment within a specified timeframe, creating a paper trail
File in Small Claims Court ($10,000 limit)
Fast, affordable, no attorney required for amounts within the limit
File a Civil Lawsuit
For amounts above small claims limits, file in Illinois civil court
Enforce the Judgment
Up to 15% of gross wages. Bank account levies and property liens also available
Statute of Limitations in Illinois
The statute of limitations for collecting on a promissory note in Illinois is 5 years (oral), 10 years (written). After this period, the lender loses the right to file a lawsuit to enforce the note.
| Aspect | Illinois Rule |
|---|---|
| Usury Rate | 9% |
| Statute of Limitations | 5 years (oral), 10 years (written) |
| Small Claims Limit | $10,000 |
| Garnishment Rules | Up to 15% of gross wages |
Sample Illinois Unsecured Promissory Note
Below is a preview of our Illinois-specific unsecured promissory note template.
STATE OF ILLINOIS
UNSECURED PROMISSORY NOTE
No Collateral Loan Agreement
LENDER:
Name: [Lender Name]
Address: [Illinois Address]
BORROWER:
Name: [Borrower Name]
Address: [Illinois Address]
LOAN TERMS
Principal: $[Amount]
Interest: [Rate]% per annum (max 9% in IL)
This note is UNSECURED. No collateral has been pledged.
Illinois Unsecured Promissory Note FAQ
Answers to common questions about unsecured promissory notes and collection procedures in Illinois.
Official Illinois Resources
Use these official resources for Illinois lending laws and court procedures.
Other Illinois Promissory Note Types
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