Kentucky Unsecured Promissory Note Overview
An unsecured promissory note in Kentucky 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 Kentucky is 8% (default).
8% default rate; maximum 19% by written agreement; 4% above Fed discount rate for some categories. Unsecured notes carry more risk for the lender, so interest rates are typically higher than secured notes. However, the rate must still comply with Kentucky's usury laws.
If the borrower defaults, the lender's primary remedy is filing a lawsuit within Kentucky's statute of limitations (5 years (oral), 15 years (written)). The small claims court limit in Kentucky is $2,500, which is ideal for smaller unsecured loans.
8% (default)
Usury rate cap
5 years
Statute of limitations
$2,500
Small claims limit
25%
Max garnishment
Kentucky Legal Requirements
Kentucky has specific requirements for unsecured promissory notes:
Important: Kentucky Usury Laws
Kentucky's maximum interest rate is 8% (default). 8% default rate; maximum 19% by written agreement; 4% above Fed discount rate for some categories. 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 Kentucky's 8% (default) 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 Kentucky law as the governing jurisdiction
Collection Remedies in Kentucky
If a borrower defaults on an unsecured promissory note in Kentucky, 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 ($2,500 limit)
Fast, affordable, no attorney required for amounts within the limit
File a Civil Lawsuit
For amounts above small claims limits, file in Kentucky civil court
Enforce the Judgment
Up to 25% of disposable earnings. Bank account levies and property liens also available
Statute of Limitations in Kentucky
The statute of limitations for collecting on a promissory note in Kentucky is 5 years (oral), 15 years (written). After this period, the lender loses the right to file a lawsuit to enforce the note.
| Aspect | Kentucky Rule |
|---|---|
| Usury Rate | 8% (default) |
| Statute of Limitations | 5 years (oral), 15 years (written) |
| Small Claims Limit | $2,500 |
| Garnishment Rules | Up to 25% of disposable earnings |
Sample Kentucky Unsecured Promissory Note
Below is a preview of our Kentucky-specific unsecured promissory note template.
STATE OF KENTUCKY
UNSECURED PROMISSORY NOTE
No Collateral Loan Agreement
LENDER:
Name: [Lender Name]
Address: [Kentucky Address]
BORROWER:
Name: [Borrower Name]
Address: [Kentucky Address]
LOAN TERMS
Principal: $[Amount]
Interest: [Rate]% per annum (max 8% (default) in KY)
This note is UNSECURED. No collateral has been pledged.
Kentucky Unsecured Promissory Note FAQ
Answers to common questions about unsecured promissory notes and collection procedures in Kentucky.
Official Kentucky Resources
Use these official resources for Kentucky lending laws and court procedures.
Other Kentucky Promissory Note Types
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