Michigan Unsecured Promissory Note Overview
An unsecured promissory note in Michigan 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 Michigan is 7% (default).
7% default rate; 25% criminal usury cap; parties may agree to any rate for non-consumer loans. Unsecured notes carry more risk for the lender, so interest rates are typically higher than secured notes. However, the rate must still comply with Michigan's usury laws.
If the borrower defaults, the lender's primary remedy is filing a lawsuit within Michigan's statute of limitations (6 years (oral and written)). The small claims court limit in Michigan is $6,500, which is ideal for smaller unsecured loans.
7% (default)
Usury rate cap
6 years
Statute of limitations
$6,500
Small claims limit
25%
Max garnishment
Michigan Legal Requirements
Michigan has specific requirements for unsecured promissory notes:
Important: Michigan Usury Laws
Michigan's maximum interest rate is 7% (default). 7% default rate; 25% criminal usury cap; parties may agree to any rate for non-consumer loans. 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 Michigan's 7% (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 Michigan law as the governing jurisdiction
Collection Remedies in Michigan
If a borrower defaults on an unsecured promissory note in Michigan, 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 ($6,500 limit)
Fast, affordable, no attorney required for amounts within the limit
File a Civil Lawsuit
For amounts above small claims limits, file in Michigan civil court
Enforce the Judgment
Up to 25% of disposable earnings. Bank account levies and property liens also available
Statute of Limitations in Michigan
The statute of limitations for collecting on a promissory note in Michigan is 6 years (oral and written). After this period, the lender loses the right to file a lawsuit to enforce the note.
| Aspect | Michigan Rule |
|---|---|
| Usury Rate | 7% (default) |
| Statute of Limitations | 6 years (oral and written) |
| Small Claims Limit | $6,500 |
| Garnishment Rules | Up to 25% of disposable earnings |
Sample Michigan Unsecured Promissory Note
Below is a preview of our Michigan-specific unsecured promissory note template.
STATE OF MICHIGAN
UNSECURED PROMISSORY NOTE
No Collateral Loan Agreement
LENDER:
Name: [Lender Name]
Address: [Michigan Address]
BORROWER:
Name: [Borrower Name]
Address: [Michigan Address]
LOAN TERMS
Principal: $[Amount]
Interest: [Rate]% per annum (max 7% (default) in MI)
This note is UNSECURED. No collateral has been pledged.
Michigan Unsecured Promissory Note FAQ
Answers to common questions about unsecured promissory notes and collection procedures in Michigan.
Official Michigan Resources
Use these official resources for Michigan lending laws and court procedures.
Other Michigan Promissory Note Types
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