Updated October 12, 2026. Quick answer: No fixed percentage: the maximum for a written agreement is 2 percentage points above the monthly average ten-year constant maturity Treasury rate published by the Federal Reserve Board, a maximum the superintendent of banking determines and publishes each month, and 5% a year applies with no written agreement (Iowa Code 535.2).
Iowa promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | No fixed percentage: 2 percentage points above the monthly average ten-year Treasury rate (Federal Reserve Board), as turned into a monthly maximum by the superintendent of banking; certain borrowers may agree in writing to any rate, including those borrowing for business or agricultural purposes, corporations, borrowers acquiring real property, and personal, family or household borrowers above the 537.1301 threshold amount |
| Rate if the note names none | 5% a year (five cents on the hundred by the year) |
| Penalty for charging too much | Not established by the documents read |
What Iowa law says about interest
Iowa sets the maximum lawful rate for a written interest agreement at two percentage points above the monthly average ten-year constant maturity Treasury rate published by the Federal Reserve Board, and the superintendent of banking determines and publishes that maximum each month, so no fixed percentage applies. Listed borrowers (including those borrowing for business or agricultural purposes) may agree in writing to any rate, and the lender is then not subject to any penalty or forfeiture.
Absent a written agreement on interest, the rate is five cents on the hundred by the year on money loaned or due by express contract.
The sources in their own words
- Interest limit: “two percentage points above the monthly average ten-year” (Iowa Code 535.2 Rate of interest (2026)).
- Rate when none is agreed: “interest shall be five cents on the hundred by the year” (Iowa Code 535.2 Rate of interest (2026)).
- Exemption or penalty: “A person borrowing money or obtaining credit for business or agricultural purposes” (Iowa Code 535.2 Rate of interest (2026)).
- Time limit to sue: “those founded on written contracts” (Iowa Code 614.1 Limitation of actions (2026)).
- Time limit to sue: “within ten years” (Iowa Code 614.1 Limitation of actions (2026)).
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
Under Iowa’s UCC 554.3401 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 Iowa 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
Iowa allows ten years to sue on a written contract (Iowa Code 614.1(5)).
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 is an assumed figure for the illustration, not a recommended or typical one; the Iowa 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
- The published Treasury-based rate changes monthly and is not stated on this page.
- Section 554.3118 governs when a note’s claim accrues, not the length of the limitation period; the ten years read is the written-contract period.
- Silence on a witness or notary in the sections read is not proof that no other Iowa law requires one.
Common mistakes
- Assuming that no stated cap means no rule: the Iowa table above gives the limit as No fixed percentage: 2 points above a monthly ten-year Treasury average, and the page lists what the documents do not say.
- 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: Iowa 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
- Iowa Code 535.2 Rate of interest (2026): https://www.legis.iowa.gov/docs/code/535.2.pdf
- Iowa Code 614.1 Limitation of actions (2026): https://www.legis.iowa.gov/docs/code/614.1.pdf
- Iowa Code 554.3401 Signature necessary for liability on instrument (2026): https://www.legis.iowa.gov/docs/code/554.3401.pdf
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.