Updated October 11, 2026. Quick answer: 6% a year on a loan of $50,000 or less, with exemptions for larger and business loans (Loan Interest and Protection Law, 41 P.S. section 201).
Pennsylvania promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 6% a year on a loan of $50,000 or less where no lower rate is contracted (except residential mortgages and federally guaranteed loans, which Article III treats separately); not applied to loans over $50,000, unsecured noncollateralized loans over $35,000, or business loans of any amount |
| Rate if the note says “with interest” but names no rate | 6% a year |
| Penalty for charging too much | A borrower need not pay the excess interest and may recover triple the excess paid within four years, plus reasonable attorney’s fees; a knowing and intentional violation is also a misdemeanor and carries a department fine |
What Pennsylvania law says about interest
Under the Loan Interest and Protection Law the maximum lawful rate on a loan of $50,000 or less is six per cent per annum where no lower rate is contracted, with exemptions for larger or business loans.
References in any law or document to the “legal rate of interest,” and references in any document to an obligation to pay money “with interest” without specifying the rate, mean six per cent per annum.
The 6% cap does not apply to loans over $50,000, unsecured noncollateralized loans over $35,000, or business loans of any amount; a borrower who paid excess may recover triple the excess within four years.
The sources in their own words
- Interest limit: “shall be six per cent per annum” (Act No. 6 of 1974, Loan Interest and Protection Law (Usury Law)).
- Exemption or penalty: “an unsecured, noncollateralized loan in excess of thirty-five thousand dollars” (Act No. 6 of 1974, Loan Interest and Protection Law (Usury Law)).
- Exemption or penalty: “may recover triple the amount of such excess interest” (Act No. 6 of 1974, Loan Interest and Protection Law (Usury Law)).
- Rate when none is agreed: “the rate of interest of six per cent per annum” (Act No. 6 of 1974, Loan Interest and Protection Law (Usury Law)).
- Time limit to sue: “negotiable or nonnegotiable bond, note or other similar instrument” (42 Pa.C.S. 5525 Four year limitation).
- Time limit to sue: “must be commenced within four years” (42 Pa.C.S. 5525 Four year limitation).
- Time limit to sue: “within six years after the due date or dates stated” (13 Pa.C.S. 3118 Statute of limitations).
If you’re ready to put it in writing
This is free to browse and there is no obligation to buy anything. LawDepot builds a state-specific promissory note through a question-and-answer form.
Build a promissory note at LawDepot
LawDepot pays us a commission if you buy through this link. It costs you nothing extra. We are not a law firm and this is not legal advice. Affiliate Disclosure.
Signing the note: signature, witness, notary
Pennsylvania’s UCC defines a promise as a written undertaking to pay money signed by the person undertaking to pay. A note is signed by the person who promises to pay.
None of the sections read for Pennsylvania 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
42 Pa.C.S. 5525(a)(7) sets four years for an action upon a note or similar instrument in writing, while 13 Pa.C.S. 3118(a) sets six years for a negotiable note payable at a definite time, so the shorter four years is the safe deadline.
A worked example: a $10,000 note
Suppose a relative lends you $10,000 and you sign a note for 3 years at 5% a year, paid monthly. With r = 5%/12 and n = 36 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $299.71 a month, computed here from these assumed inputs, not quoted. Over the 36 payments that is $10,789.56 in total, of which $789.56 is interest.
The 5% rate sits inside the Pennsylvania 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
- Which of the two limitation sections 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 Pennsylvania law requires one.
Common mistakes
- Charging more than the limit in Pennsylvania, which the table gives as 6% on loans of $50,000 or less, means the borrower need not pay the excess and may recover triple the excess interest paid within four years, plus attorney’s fees; a knowing and intentional violation is also a misdemeanor.
- Leaving the rate out: a note that says “with interest” but names no rate is read as six per cent per annum under section 202, which is rarely what the parties meant.
- Waiting too long to enforce: Pennsylvania allows 4 years (6 for a negotiable note) 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
- Act No. 6 of 1974, Loan Interest and Protection Law (Usury Law): https://www.legis.state.pa.us/WU01/LI/LI/US/HTM/1974/0/0006..HTM
- 42 Pa.C.S. 5525 Four year limitation: https://www.legis.state.pa.us/WU01/LI/LI/CT/HTM/42/00.055.025.000..HTM
- 13 Pa.C.S. 3118 Statute of limitations: https://www.legis.state.pa.us/WU01/LI/LI/CT/HTM/13/03.031.018.000..HTM
- 13 Pa.C.S. 3103 Definitions and index of definitions: https://www.legis.state.pa.us/WU01/LI/LI/CT/HTM/13/03.031.003.000..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.