Updated October 12, 2026. Quick answer: Up to 9% a year on a written loan, with exemptions such as loans to a corporation and qualifying business loans, and 5% a year when no rate is agreed (815 ILCS 205/1 and 205/4).
Illinois promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 9% a year by written agreement; exempt categories include loans to a corporation, qualifying business loans and loans secured by a mortgage on real estate (815 ILCS 205/4(1)) |
| Rate if the note names none | 5% a year ($5 on each $100 for one year) |
| Penalty for charging too much | A lender who knowingly contracts for or receives unlawful interest, discount or charges owes the borrower twice the total of all interest, discount and charges determined by the loan contract or paid, whichever is greater, plus reasonable attorney’s fees and court costs the court assesses; an action must be brought within 2 years after the earlier of the last scheduled payment or full payment |
What Illinois law says about interest
Illinois lets parties to a written contract agree to an annual percentage rate of 9% or less on a loan, with listed exemptions such as loans to corporations and qualifying business loans.
When no rate is agreed, the statutory rate is five dollars per one hundred dollars for one year (5%).
Exempt categories include loans made to a corporation and qualifying business loans; a lender who knowingly contracts for or receives unlawful interest, discount or charges is liable to the obligor for twice the total of all interest, discount and charges determined by the loan contract or paid, whichever is greater, plus reasonable attorney’s fees and court costs the court assesses; recovery by action must come within 2 years after the earlier of the last scheduled payment or full payment, and by defense at any time after the loan.
The sources in their own words
- Interest limit: “an annual percentage rate of 9%, or any less sum” (815 ILCS 205/4 General interest rate).
- Exemption or penalty: “Any loan made to a corporation” (815 ILCS 205/4 General interest rate).
- Rate when none is agreed: “five dollars ($5) upon one hundred dollars ($100) for one year” (815 ILCS 205/1).
- Exemption or penalty: “an amount equal to twice the total of all interest” (815 ILCS 205/6).
- Time limit to sue: “promissory notes, bills of exchange, written leases, written contracts” (735 ILCS 5/13-206 Ten year limitation).
- Time limit to sue: “shall be commenced within 10 years next after the cause” (735 ILCS 5/13-206 Ten year limitation).
- Exemption or penalty: “statutory damages equal to twice the interest paid” (2014 IL App (1st) 120688-U (Eng v. Tin), Interest Act loan dispute).
- Rate on money after it becomes due: “at the rate of five (5) per centum per annum for all moneys after they become due on any bond, bill, promissory note” (815 ILCS 205/2 Interest on money due (legal rate)).
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Signing the note: signature, witness, notary
Under Illinois UCC 3-401 a person is not liable on an instrument unless that person signed it, or an agent who signed binds them. A note is signed by the person who promises to pay.
None of the sections read for Illinois 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
Illinois allows 10 years to sue on a written promissory note, including a demand note (735 ILCS 5/13-206).
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 Illinois 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 exemption list is summarised, not reproduced in full; read the statute before relying on an exemption.
- The second source for the twice-interest rule is an unpublished Appellate Court order, which is not binding precedent.
- Silence on a witness or notary in the sections read is not proof that no other Illinois law requires one.
Common mistakes
- Knowingly charging more than the limit in Illinois, which the table gives as 9% by written agreement (with exemptions such as loans to corporations and business loans), exposes the lender to liability for twice the total of all interest, discount and charges plus fees and costs.
- 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: Illinois allows 10 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
- 815 ILCS 205/4 General interest rate: https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081502050K4
- 815 ILCS 205/1: https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081502050K1
- 815 ILCS 205/6: https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081502050K6
- 735 ILCS 5/13-206 Ten year limitation: https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=073500050K13-206
- 810 ILCS 5/3-401 Signature necessary for liability on instrument: https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081000050K3-401
- 2014 IL App (1st) 120688-U (Eng v. Tin), Interest Act loan dispute: https://www.illinoiscourts.gov/files/1120688_R23.pdf/opinion
- 815 ILCS 205/2 Interest on money due (legal rate): https://www.ilga.gov/Documents/legislation/ilcs/documents/081502050K2.htm
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.