Updated October 11, 2026. Quick answer: 7% a year by written agreement, with criminal usury above 25% simple interest, and 5% a year when no rate is agreed (MCL 438.31 and 438.41).
Michigan promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 7% a year by written agreement; criminal usury above 25% simple interest |
| Rate if the note names none | 5% a year ($5.00 on $100.00 for a year) |
| Penalty for charging too much | Knowingly charging, where not authorized or permitted by law, more than 25% simple interest per annum (or the equivalent rate for a longer or shorter period) is criminal usury, punishable by up to 5 years in prison or a fine of up to $10,000, or both |
What Michigan law says about interest
Michigan lets parties stipulate in writing for any rate of interest not exceeding 7% per annum; criminal usury begins above 25% simple interest.
When no rate is agreed, interest is $5.00 upon $100.00 for a year (5%).
The 7% Act does not apply to notes or bonds whose issue and rate are authorized by the public service commission or the securities bureau, to obligations whose rate is regulated by other state or federal law, or to a time price differential on credit sales. Separately, a person who, not being authorized or permitted by law, knowingly charges more than 25% simple interest per annum (or the equivalent for a longer or shorter period) is guilty of criminal usury, punishable by up to 5 years in prison or a fine of up to $10,000, or both.
The sources in their own words
- Interest limit: “any rate of interest, not exceeding 7% per annum” (MCL Section 438.31 Legal interest rate).
- Rate when none is agreed: “at the rate of $5.00 upon $100.00 for a year” (MCL Section 438.31 Legal interest rate).
- Exemption or penalty: “at a rate exceeding 25% at simple interest per annum” (MCL Section 438.41 Criminal usury).
- Time limit to sue: “must be commenced within 6 years after the due date” (MCL Section 440.3118 Action to enforce obligation).
If you’re ready to put it in writing
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Signing the note: signature, witness, notary
Under MCL 440.3401 a person is not liable on an instrument unless that person signed it or an agent signed for them. A note is signed by the person who promises to pay.
None of the sections read for Michigan 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
Michigan’s enacted UCC 3-118 gives 6 years after the due date to sue on a note payable at a definite time.
A worked example: a $15,000 note
Suppose a relative lends you $15,000 and you sign a note for 5 years at 6% a year, paid monthly. With r = 6%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $289.99 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $17,399.40 in total, of which $2,399.40 is interest.
The 6% rate sits inside the Michigan 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
- The documents read do not state a civil penalty for charging above 7%.
- Silence on a witness or notary in the sections read is not proof that no other Michigan law requires one.
Common mistakes
- Charging more than the limit in Michigan, which the table gives as 7% by written agreement, has no civil penalty stated in the sections read; knowingly charging above 25% simple interest per annum, where not authorized or permitted by law, is criminal usury.
- Leaving the rate out: the legal rate of 5% applies when a note names none, and it is rarely what the parties meant.
- Waiting too long to enforce: Michigan allows 6 years 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
- MCL Section 438.31 Legal interest rate: https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-438-31
- MCL Section 438.41 Criminal usury: https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-438-41
- MCL Section 440.3118 Action to enforce obligation: https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-440-3118
- MCL Section 440.3401 Signature: https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-440-3401
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.