Texas Unsecured Promissory Note Overview
An unsecured promissory note in Texas 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 Texas is 10% (default) / 18% (max).
10% default rate; 18% maximum for written contracts; penalties for usury include forfeiture of interest. Unsecured notes carry more risk for the lender, so interest rates are typically higher than secured notes. However, the rate must still comply with Texas's usury laws.
If the borrower defaults, the lender's primary remedy is filing a lawsuit within Texas's statute of limitations (4 years (oral and written)). The small claims court limit in Texas is $20,000, which is ideal for smaller unsecured loans.
10% (default) / 18% (max)
Usury rate cap
4 years
Statute of limitations
$20,000
Small claims limit
25%
Max garnishment
Texas Legal Requirements
Texas has specific requirements for unsecured promissory notes:
Important: Texas Usury Laws
Texas's maximum interest rate is 10% (default) / 18% (max). 10% default rate; 18% maximum for written contracts; penalties for usury include forfeiture of interest. 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 Texas's 10% (default) / 18% (max) 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 Texas law as the governing jurisdiction
Collection Remedies in Texas
If a borrower defaults on an unsecured promissory note in Texas, 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 ($20,000 limit)
Fast, affordable, no attorney required for amounts within the limit
File a Civil Lawsuit
For amounts above small claims limits, file in Texas civil court
Enforce the Judgment
Wages generally exempt; garnishment only for child support, taxes, and student loans. Bank account levies and property liens also available
Statute of Limitations in Texas
The statute of limitations for collecting on a promissory note in Texas is 4 years (oral and written). After this period, the lender loses the right to file a lawsuit to enforce the note.
| Aspect | Texas Rule |
|---|---|
| Usury Rate | 10% (default) / 18% (max) |
| Statute of Limitations | 4 years (oral and written) |
| Small Claims Limit | $20,000 |
| Garnishment Rules | Wages generally exempt; garnishment only for child support, taxes, and student loans |
Sample Texas Unsecured Promissory Note
Below is a preview of our Texas-specific unsecured promissory note template.
STATE OF TEXAS
UNSECURED PROMISSORY NOTE
No Collateral Loan Agreement
LENDER:
Name: [Lender Name]
Address: [Texas Address]
BORROWER:
Name: [Borrower Name]
Address: [Texas Address]
LOAN TERMS
Principal: $[Amount]
Interest: [Rate]% per annum (max 10% (default) / 18% (max) in TX)
This note is UNSECURED. No collateral has been pledged.
Texas Unsecured Promissory Note FAQ
Answers to common questions about unsecured promissory notes and collection procedures in Texas.
Official Texas Resources
Use these official resources for Texas lending laws and court procedures.
Other Texas Promissory Note Types
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