Updated October 12, 2026. Quick answer: Up to 19% a year (or 4 points over the Federal Reserve 90-day commercial paper rate, if lower) in writing on a loan of $15,000 or less, any agreed rate above $15,000, and 8% a year as the legal rate (for a written obligation that states no rate, interest after default and until judgment) (KRS 360.010).
Kentucky promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 19% a year (or 4 points over the Federal Reserve 90-day commercial paper discount rate, whichever is less) on $15,000 or less; no cap above $15,000 |
| Rate if the note names none | 8% a year legal rate; on a written obligation that states no rate, interest after default and until judgment runs at that rate |
| Penalty for charging too much | Knowingly charging above the allowed rate forfeits all the interest, and excess interest paid may be recovered at twice the amount if sued for within two years |
What Kentucky law says about interest
Kentucky sets an 8% legal rate but lets parties agree in writing to more: for a written obligation of $15,000 or less, up to 4 points over the Federal Reserve 90-day commercial paper discount rate or 19%, whichever is less, and at any rate when the original principal exceeds $15,000.
When a written obligation specifies no rate, interest after default runs at the 8% legal rate under KRS 360.010.
No cap applies when the original principal exceeds $15,000; knowingly charging above the allowed rate forfeits the entire interest, and interest paid above it may be recovered at twice the amount if sued within two years (KRS 360.020).
The sources in their own words
- Interest limit: “the legal rate of interest is eight percent (8%)” (KRS 360.010 Legal interest rate: Agreement for higher rate).
- Interest limit: “nineteen percent (19%), whichever is less” (KRS 360.010 Legal interest rate: Agreement for higher rate).
- Exemption or penalty: “original principal amount is in excess of fifteen thousand dollars ($15,000)” (KRS 360.010 Legal interest rate: Agreement for higher rate).
- Rate when none is agreed: “interest after default and until judgment at the legal rate of interest” (KRS 360.010 Legal interest rate: Agreement for higher rate).
- Exemption or penalty: “shall be deemed a forfeiture of the entire interest” (KRS 360.020 Civil penalty for charging excessive interest).
- Time limit to sue: “within six (6) years after the due date or dates” (KRS 355.3-118 Statute of limitations).
- Time limit to sue: “within ten (10) years after the cause of action accrued” (KRS 413.160 Actions upon written contract).
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Signing the note: signature, witness, notary
Under KRS 355.3-401 a person is not liable on an instrument unless the person signed it or an agent who signed is binding on that person. A note is signed by the person who promises to pay.
None of the sections read for Kentucky 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
Kentucky gives six years after the due date to sue on a note payable at a definite time (KRS 355.3-118), and ten years on other written contracts signed after July 15, 2014 (KRS 413.160).
A worked example: a $10,000 note
Suppose a relative lends you $10,000 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): $202.76 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $12,165.60 in total, of which $2,165.60 is interest.
The 8% rate sits inside the Kentucky 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
- Which of the two time limits governs a particular note is a legal question the documents read do not settle.
- Silence on a witness or notary in the sections read is not proof that no other Kentucky law requires one.
Common mistakes
- Charging more than the limit in Kentucky, which the table gives as 19% on $15,000 or less (no cap above $15,000), when knowingly done forfeits the entire interest, and interest already paid above the limit may be recovered at twice the amount if sued for within two years (KRS 360.020).
- Leaving the rate out: on a written note that states no rate, interest after default and until judgment runs at the 8% legal rate, and it is rarely what the parties meant.
- Waiting too long to enforce: Kentucky allows 6 years (note); 10 years (other written contract) 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
- KRS 360.010 Legal interest rate: Agreement for higher rate: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=47989
- KRS 360.020 Civil penalty for charging excessive interest: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=34171
- KRS 355.3-118 Statute of limitations: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=33446
- KRS 413.160 Actions upon written contract: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=43544
- KRS 355.3-401 Signature necessary for liability on instrument: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=55646
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.