Updated October 12, 2026. Quick answer: A written agreement may carry any rate up to the greater of 15% or 6 percentage points over the federal prime rate, regulated lenders are outside the section, and 10% a year applies to overdue money absent a written rate (Mont. Code Ann. 31-1-106 and 31-1-107).
Montana promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | The greater of 15% or 6 percentage points over the federal prime rate, by written agreement; regulated lenders are outside the section |
| Rate if the note names none | 10% a year on overdue money |
| Penalty for charging too much | Charging more than the permitted rate forfeits a sum double the interest the note carries |
What Montana law says about interest
Montana lets parties agree in writing to any rate not above the greater of 15% or six points over the federal prime rate, and the rule excludes regulated lenders.
Except as otherwise provided by the Uniform Commercial Code and sections 31-1-111 and 31-1-112, and unless an express written contract (or a law, ordinance or resolution on a public body’s own obligations) fixes a different rate, money bears 10% a year after it becomes due on an instrument of writing other than a judgment, and on the other items the section lists.
Charging more than the 31-1-107 rate forfeits double the interest the note carries, and a payer may recover double the interest paid if suit is brought within 2 years after payment and after written demand; regulated lenders are outside the section. Criminal usury was not read.
The sources in their own words
- Interest limit: “any rate of interest that does not exceed the greater of 15% or an amount that is 6 percentage points per year above the prime rate” (31-1-107. Interest rate allowed by agreement, MCA).
- Rate when none is agreed: “is payable on all money at the rate of 10% a year” (31-1-106. Legal interest, MCA).
- Exemption or penalty: “a forfeiture of a sum double the amount of interest” (31-1-108. Penalty for usury: action to recover excessive interest, MCA).
- Exemption or penalty: “do not apply to regulated lenders as defined in 31-1-111” (31-1-107. Interest rate allowed by agreement, MCA).
- Time limit to sue: “founded on an instrument in writing is within 6 years” (27-2-202. Actions based on contract or other obligation, MCA).
- Time limit to sue: “must be commenced within 6 years after the payment date or dates” (30-3-122. Statute of limitations, MCA).
- Signature: “A person is not liable on an instrument unless:” (30-3-401. Signature necessary for liability on instrument, MCA).
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Signing the note: signature, witness, notary
Under Mont. Code Ann. 30-3-401 a person is not liable on an instrument unless the person signed it or an agent or representative signed for them. A note is signed by the person who promises to pay.
None of the sections read for Montana 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
Montana gives 6 years to sue on a note payable at a definite time (30-3-122) and 6 years on a contract founded on an instrument in writing (27-2-202).
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 8% a year, paid monthly. With r = 8%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $405.53 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $24,331.80 in total, of which $4,331.80 is interest.
The 8% rate sits inside the Montana 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 prime rate changes and is not stated on this page, so the ceiling is a formula and not a single percentage.
- Criminal usury was not read.
- Silence on a witness or notary in the sections read is not proof that no other Montana law requires one.
Common mistakes
- Charging more than the limit in Montana, which the table gives as the greater of 15% or 6 points over prime, by written agreement, is treated as a forfeiture of a sum double the interest the note carries, and a payer can recover double the interest paid if suit follows written demand and is brought within 2 years after payment.
- Leaving the rate out: the legal rate of 10% a year on overdue money applies when a note names none, and it is rarely what the parties meant.
- Waiting too long to enforce: Montana 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
- 31-1-107. Interest rate allowed by agreement, MCA: https://mca.legmt.gov/bills/mca/title_0310/chapter_0010/part_0010/section_0070/0310-0010-0010-0070.html
- 31-1-106. Legal interest, MCA: https://mca.legmt.gov/bills/mca/title_0310/chapter_0010/part_0010/section_0060/0310-0010-0010-0060.html
- 31-1-108. Penalty for usury: action to recover excessive interest, MCA: https://mca.legmt.gov/bills/mca/title_0310/chapter_0010/part_0010/section_0080/0310-0010-0010-0080.html
- 27-2-202. Actions based on contract or other obligation, MCA: https://mca.legmt.gov/bills/mca/title_0270/chapter_0020/part_0020/section_0020/0270-0020-0020-0020.html
- 30-3-122. Statute of limitations, MCA: https://mca.legmt.gov/bills/mca/title_0300/chapter_0030/part_0010/section_0220/0300-0030-0010-0220.html
- 30-3-401. Signature necessary for liability on instrument, MCA: https://mca.legmt.gov/bills/mca/title_0300/chapter_0030/part_0040/section_0010/0300-0030-0040-0010.html
Sources: the primary documents linked above, read on October 12, 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.