How to Fill Out a Texas Promissory Note: Secured or Unsecured

To fill out a Texas promissory note, you identify the borrower and lender, state the principal amount in numerals and words, set a repayment schedule and a legal interest rate, add protective clauses like acceleration and late fees, and have the borrower sign. The lender keeps the signed original; the borrower keeps a copy. If real property secures the loan, the note is paired with a notarized deed of trust that gets recorded with the county.

Start by Deciding Secured or Unsecured

This choice shapes the rest of the document. A secured note ties the debt to specific property — a vehicle, equipment, or real estate — that the lender can seize on default. An unsecured note has no collateral, so if the borrower stops paying, the lender’s only remedy is a lawsuit and a judgment against the borrower’s non-exempt assets.¹

When real property secures the note, you’ll prepare a second document: a deed of trust, recorded in the county’s real property records, that creates the lien. The promissory note sets the money terms. The deed of trust is what allows foreclosure if those terms are broken. For personal property collateral, a separate security agreement plays a similar role. The note itself remains the borrower’s personal promise to pay.

Fill In the Parties and Principal

Write the full legal names and current addresses of both borrower (“maker”) and lender (“payee”). Use registered entity names for any business party. State the principal — the total dollars borrowed before interest — in both numerals and words, the way you’d write a check.

These basics matter beyond neatness. Under Texas Business and Commerce Code Section 3.104, a note only qualifies as a negotiable instrument if it promises to pay a fixed amount of money, is payable on demand or at a definite time, and is payable to bearer or to the order of a specific person.² Vague party identification or a floating amount can cost the lender that status.

Set the Repayment Terms

Specify exactly how and when the borrower will pay. Most notes use one of three structures:

Installment payments: equal periodic payments (monthly or quarterly) that include principal and interest, spread over a fixed term.
Interest-only with a balloon: the borrower pays only interest during the term, then owes the entire principal in a single lump sum at maturity.
Lump sum at maturity: no payments until the end, when the full principal plus accrued interest comes due at once.

Fill in the start date for payments, the frequency, the dollar amount of each payment, and the maturity date when the final balance is due. Vague language here is where most disputes start.

Choose a Legal Interest Rate

Texas caps the maximum interest rate on most loans at 10% per year. Anything higher is usurious unless a specific statutory exception applies.³ The exceptions cover certain commercial transactions, licensed consumer lenders, and credit card issuers. Private loans between individuals and small business loans from non-licensed lenders generally sit under the 10% ceiling.

Watch what counts as interest. Texas aggregates all interest contracted for over the loan’s stated term, so origination fees, points, and other charges that function as prepaid interest can push the effective rate over the cap even when the stated rate looks safe. The penalties for a usurious contract can include forfeiting the interest charged.³

Federal tax law adds a second floor. Under Internal Revenue Code Section 7872, if you charge less than the Applicable Federal Rate (AFR) — which the IRS publishes monthly — the IRS can impute the difference as interest to the lender and may treat the shortfall as a gift. For April 2026, the AFR ranges from 3.59% for short-term loans (three years or less) to 4.62% for long-term loans (more than nine years).⁴

Two safe harbors help small loans. Loans of $10,000 or less between individuals are exempt from imputed-interest rules entirely, as long as the borrower isn’t buying income-producing assets. For loans between $10,000 and $100,000, the imputed interest is capped at the borrower’s net investment income for the year.⁴ Above $100,000, the full AFR applies with no cap. The rate is locked in at the month the loan is made, so confirm the AFR before signing.

Add a Late Fee Within the Legal Cap

For loans at 10% annual interest or below, Texas Finance Code Section 302.001(d) allows a delinquency charge once a payment is at least 10 days overdue. The charge cannot exceed the greater of 5% of the overdue payment or $7.50.³ Loans governed by other chapters of the Finance Code (such as Chapter 342 for consumer loans from licensed lenders) may follow different late-fee rules, so check whether an exception applies before writing in a higher amount.

Include an Acceleration Clause

This is the single most important protective clause in any installment note. An acceleration clause lets the lender declare the entire remaining balance due immediately if the borrower misses a payment or breaks another term. Without one, the lender can only chase the specific installment that’s past due, not the whole loan.

Sample language from an SEC-filed note reads that the lender may, “at the sole discretion of Lender and without notice,” declare the entire unpaid balance immediately due upon an event of default.⁵

Other Clauses Worth Including

A governing-law clause confirming that Texas law applies heads off arguments about which state’s rules control. A dispute-resolution clause can require mediation or arbitration before either side files a lawsuit, though mandatory arbitration waives the borrower’s right to a jury trial and to participate in a class action. If the note is secured, reference the collateral and the accompanying security agreement or deed of trust so the two documents are clearly linked.

Add a Co-signer or Guarantor If Needed

When the borrower’s credit or income isn’t strong enough alone, the lender may ask for another party on the note. The two roles differ. A co-signer is on the hook for every missed payment from day one; the lender can pursue the co-signer as soon as a single installment goes unpaid. A guarantor is typically liable only after the borrower fully defaults and the lender has exhausted efforts to collect from the primary borrower.

Name the co-signer in the document and have them sign alongside the borrower. Spell out their obligation: joint and several liability means the lender can collect the full amount from either party, not a proportional share. A co-signer who wants the option to step off the loan after the borrower builds a payment history should negotiate a written release clause up front, because there’s no automatic exit.

Sign, Notarize If Applicable, and Deliver Copies

Only the borrower needs to sign. The lender is receiving the promise, not making one, so the lender’s signature isn’t required to make the document enforceable. If there are multiple borrowers, each signs.

Texas does not require notarization for a basic unsecured promissory note. Having a notary witness the borrower’s signature still makes it much harder for the borrower to later claim forgery or deny agreement to the terms. For notes secured by real property, notarization is a practical necessity: Texas Property Code Section 12.001 requires instruments to be acknowledged or sworn before an authorized officer in order to be recorded in the county’s real property records.⁶ A Texas notary can charge up to $10 for the first signature and $1 for each additional signature on the same document.⁷

After signing, the lender keeps the original. The borrower gets a complete copy. The original is the lender’s proof of the debt; the copy is the borrower’s proof of the exact terms. Store both securely.

Know the Four-Year Deadline to Sue

A lender who needs to sue on an unpaid Texas promissory note has four years from the date the cause of action accrues. That comes from Texas Civil Practice and Remedies Code Section 16.004, which governs actions for debt.⁸ For installment notes, each missed payment can start its own four-year clock. If the lender uses the acceleration clause and calls the full balance due, the clock runs on the entire debt from the date of acceleration. Wait too long and the right to collect through the courts is gone, even though the debt itself doesn’t disappear.

What to Do at Payoff

Once the borrower makes the final payment, the lender should mark the original note “Paid in Full,” date it, and return it to the borrower. Returning the original prevents the note from resurfacing later as the basis for a duplicate collection attempt.

For notes secured by real property, file a release of lien to clear title. Under Texas Finance Code Section 343.108, the lender or mortgage servicer has 60 days after receiving the payoff amount to deliver the release to the borrower or file it with the county clerk. If the borrower sends a written request for the release within 20 days of payoff, that deadline shrinks to 30 days.⁹ An unrecorded release does little good; without the filing, the lien still shows on title searches and can block a future sale or refinance. Pull a copy of the property records from the county clerk to confirm the lien is gone.

1
Texas Law Help. Rights of Debtors in Texas
2
State of Texas. Texas Business and Commerce Code BUS and COM 3.104
3
State of Texas. Texas Finance Code 302.001 – Contracting For, Charging, or Receiving Interest or Time Price Differential; Usurious Interest
4
Office of the Law Revision Counsel. 26 U.S. Code 7872 – Treatment of Loans With Below-Market Interest Rates
5
U.S. Securities and Exchange Commission. Form of Promissory Note
6
Victoria County Texas. Requirements for the Recording of Documents Relating to Real Property
7
State of Texas. Texas Government Code 406.024 – Fees
8
State of Texas. Texas Civil Practice and Remedies Code 16.004 – Four-Year Limitations Period
9
State of Texas. Texas Finance Code FIN 343.108