Updated October 11, 2026. Quick answer: 10% a year by default, or up to the Chapter 303 ceiling (never below 18% and at most 24% for a consumer loan) if the parties agree in writing; with no agreed interest the legal rate is 6%, beginning on the 30th day after the amount is due (Texas Finance Code chapters 302 and 303).
Texas promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 10% a year by default; by written agreement up to the Chapter 303 ceiling (never below 18% and at most 24% for a consumer loan) |
| Rate if the note names none | 6% a year, starting on the 30th day after the amount is due |
| Penalty for charging too much | For a personal, family or household transaction a creditor charging excess interest owes the greater of three times the excess or the lesser of $2,000 and 20 percent of the principal, and a creditor who charges and receives more than twice the authorized interest also owes the principal and all interest and other amounts received (Chapter 305) |
What Texas law says about interest
The default maximum is 10 percent a year, but parties to a written agreement may instead agree to a rate up to the Chapter 303 ceiling, which is never below 18 percent and at most 24 percent a year (28 percent for business or investment credit).
If no interest is agreed, the creditor may charge legal interest of six percent a year beginning on the 30th day after the amount is due.
Use of the Chapter 303 ceilings is optional; for personal, family or household transactions a creditor charging excess interest owes the greater of three times the excess or the lesser of $2,000 and 20 percent of the principal, and a creditor who charges and receives more than twice the authorized interest also owes the principal and all interest and other amounts received (Chapter 305).
The sources in their own words
- Interest limit: “The maximum rate or amount of interest is 10 percent a year” (Finance Code Chapter 302. Interest Rates).
- Rate when none is agreed: “legal interest at the rate of six percent a year” (Finance Code Chapter 302. Interest Rates).
- Interest limit: “may agree to an interest rate, or in an agreement described by Chapter 345, 347, 348, or 353, an amount of time price differential producing a rate, that does not exceed the applicable weekly ceiling” (Finance Code Chapter 303. Optional Rate Ceilings).
- Interest limit: “If the rate computed for the weekly, monthly, quarterly, or annualized ceiling is less than 18 percent a year, the ceiling is 18 percent a year” (Finance Code Chapter 303. Optional Rate Ceilings).
- Exemption or penalty: “three times the amount computed by subtracting the amount of interest” (Finance Code Chapter 305. Civil Liability).
- Time limit to sue: “within six years after the due date or dates stated” (Business and Commerce Code Chapter 3. Negotiable Instruments).
If you’re ready to put it in writing
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Signing the note: signature, witness, notary
A promise under Texas’s UCC is a written undertaking to pay money signed by the person undertaking to pay, and a person is not liable on an instrument unless that person signed it. A note is signed by the person who promises to pay.
None of the sections read for Texas requires a witness or a notary for the note itself. A note secured by real property is a separate question; see what an intra-family mortgage requires.
How long a lender has to sue
Texas’s enacted UCC 3.118 gives six years after the due date to sue on a note payable at a definite time; Civ. Prac. & Rem. Code 16.004 separately sets four years for a suit on a debt, so a non-negotiable note may face the shorter period.
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 9% a year, paid monthly. With r = 9%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $415.17 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $24,910.20 in total, of which $4,910.20 is interest.
The 9% rate sits inside the Texas limit in the table above, which is why it was chosen. The federal side of a loan between relatives is covered at family loan minimum interest rate and AFR rates by month.
A loan or a gift?
A loan that may never be repaid is taxed differently; see family loan vs gift, forgiving a family loan and gift tax by state.
What the documents do not say
- Whether the 6-year note period or the 4-year debt period governs a particular note is a legal question the documents read do not settle.
- Silence on a witness or notary in the sections read is not proof that no other Texas law requires one.
Common mistakes
- Charging more than the limit in Texas, which the table gives as 10% by default; up to 18% to 24% (28% for business, commercial or investment credit) by written agreement, makes the creditor liable to the borrower under Chapter 305: for a personal, family or household transaction the greater of three times the excess interest or the lesser of $2,000 and 20 percent of the principal, plus reasonable attorney’s fees.
- Leaving the rate out: if no interest is agreed, the legal rate of 6% a year can be charged only beginning on the 30th day after the amount is due, and it is rarely what the parties meant.
- Waiting too long to enforce: Texas allows 6 years (4 years for a debt) to sue on a written note.
Related: promissory notes by state, promissory note requirements, family loan minimum interest rate, and gift tax by state.
Sources
- Finance Code Chapter 302. Interest Rates: https://tcss.legis.texas.gov/resources/FI/htm/FI.302.htm
- Finance Code Chapter 303. Optional Rate Ceilings: https://tcss.legis.texas.gov/resources/FI/htm/FI.303.htm
- Finance Code Chapter 305. Civil Liability: https://tcss.legis.texas.gov/resources/FI/htm/FI.305.htm
- Business and Commerce Code Chapter 3. Negotiable Instruments: https://tcss.legis.texas.gov/resources/BC/htm/BC.3.htm
Sources: the primary documents linked above, read on October 11, 2026. General information, not legal or tax advice. Statutes change and courts read them, so confirm anything consequential with a lawyer licensed in your state.