Updated October 12, 2026. Quick answer: Unless another code section sets a maximum, there is no maximum interest rate between persons who set the rate by written agreement, and the maximum rate is twelve percent a year when interest is owed but no rate is specified (SDCL 54-3-1.1 and 54-3-4).
South Dakota promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | No maximum or usury restriction where the rate is set by written agreement, unless another code section sets one |
| Rate if the note names none | A maximum of twelve percent a year when interest is owed and no rate is specified; fifteen percent a year on moneys after they become due on an instrument of writing, unless an express written contract fixes a different rate |
| Penalty for charging too much | Not established by the documents read |
What South Dakota law says about interest
South Dakota sets no maximum interest rate or usury restriction between persons or entities who establish the rate by written agreement, unless another code section sets a maximum.
Where interest is owed but no rate is specified, the maximum is the Category C rate, twelve percent per year; after an instrument falls due with no written rate, the Category F rate of fifteen percent per year applies.
The sources in their own words
- Interest limit: “Unless a maximum interest rate or charge is specifically established elsewhere in the code, there is no maximum interest rate or charge, or usury rate restriction” (SDCL 54-3-1.1 Rate of interest set by written agreement).
- Interest limit: “establish the interest rate or charge by written agreement” (SDCL 54-3-1.1 Rate of interest set by written agreement).
- Rate when none is agreed: “at a maximum rate of the Category C rate of interest” (SDCL 54-3-4 Maximum rate of interest where no rate specified).
- Rate when none is agreed: “Category C rate of interest is twelve percent per year” (SDCL 54-3-16 Official state interest rates).
- Exemption or penalty: “presumed to be made upon interest, unless it is otherwise expressly stipulated” (SDCL 54-3-2 Loan of money: Presumption as to interest).
- Time limit to sue: “must be commenced within six years after the due date or dates” (SDCL 57A-3-118 Statute of limitations).
- Time limit to sue: “can be commenced only within six years after the cause of action” (SDCL 15-2-13 Contract obligation or liability).
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Signing the note: signature, witness, notary
Under SDCL 57A-3-401 a person is not liable on an instrument unless the 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 South Dakota 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
South Dakota’s enacted UCC 3-118 gives six years after the due date to sue on a note payable at a definite time, and SDCL 15-2-13 gives six years on a contract, obligation or liability.
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 is an assumed figure for the illustration, not a recommended or typical one; the South Dakota rules above decide what a lender may charge. 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
- Criminal usury provisions were not read.
- The South Dakota legislature’s site is script-driven, so the statute text was read from its statutes feed.
- Silence on a witness or notary in the sections read is not proof that no other South Dakota law requires one.
Common mistakes
- Assuming that no stated cap means no rule: the South Dakota table above gives the limit as no maximum where the rate is set by written agreement, unless another code section sets one, and the page lists what the documents do not say.
- Leaving the rate out: where interest is owed and no rate is specified, the maximum is twelve percent a year, and fifteen percent a year applies on moneys after they become due on an instrument of writing unless an express written contract fixes a different rate; it is rarely what the parties meant.
- Waiting too long to enforce: South Dakota 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
- SDCL 54-3-1.1 Rate of interest set by written agreement: https://sdlegislature.gov/api/Statutes/54-3-1.1.html
- SDCL 54-3-4 Maximum rate of interest where no rate specified: https://sdlegislature.gov/api/Statutes/54-3-4.html
- SDCL 54-3-16 Official state interest rates: https://sdlegislature.gov/api/Statutes/54-3-16.html
- SDCL 54-3-2 Loan of money: Presumption as to interest: https://sdlegislature.gov/api/Statutes/54-3-2.html
- SDCL 57A-3-118 Statute of limitations: https://sdlegislature.gov/api/Statutes/57A-3-118.html
- SDCL 15-2-13 Contract obligation or liability: https://sdlegislature.gov/api/Statutes/15-2-13.html
- SDCL 57A-3-401 Signature necessary for liability on instrument: https://sdlegislature.gov/api/Statutes/57A-3-401.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.