Updated October 11, 2026. Quick answer: On a loan of $25,000 or less the written rate is capped by a formula, on a larger loan any agreed rate is allowed, and with no rate the legal rate is 8% (N.C.G.S. chapter 24).
North Carolina promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | Principal of $25,000 or less: a rate capped by the Commissioner of Banks’ monthly formula; above $25,000: any agreed rate |
| Rate if the note names none | 8% a year |
| Penalty for charging too much | A knowing overcharge forfeits the entire interest, and the borrower may recover twice the interest paid |
What North Carolina law says about interest
Except as otherwise provided in Chapter 24 or other applicable law, for a loan other than a credit card or open-end loan of $25,000 or less, parties may contract in writing for interest up to the monthly maximum announced by the Commissioner of Banks (the six-month T-bill rate plus 6%, rounded to the nearest 1/2%, or 16%, whichever is greater); above $25,000 any agreed rate is allowed.
The legal rate of interest is eight percent per annum for such time as interest may accrue, and no more, except as G.S. 136-113 provides.
Loans of more than $25,000 may carry any agreed rate. A knowing overcharge forfeits the entire interest, and the borrower may recover twice the interest paid.
The sources in their own words
- Interest limit: “Where the principal amount is twenty-five thousand dollars ($25,000) or less” (G.S. 24-1.1 Contract rates and fees).
- Rate when none is agreed: “the legal rate of interest shall be eight percent (8%) per annum” (G.S. 24-1 Legal rate is eight percent).
- Exemption or penalty: “shall be a forfeiture of the entire interest” (G.S. 24-2 Penalty for usury).
- Time limit to sue: “must be commenced within six years after the due date” (G.S. 25-3-118 Statute of limitations).
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Signing the note: signature, witness, notary
Under N.C.G.S. 25-3-401 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 North Carolina 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
North Carolina’s enacted UCC 3-118 gives six years after the due date to sue on a note payable at a definite time (the general contract period is 3 years under G.S. 1-52).
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 North Carolina 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 monthly cap for loans of $25,000 or less is set by a formula the Commissioner of Banks publishes, and its current figure is not quoted on this page.
- Silence on a witness or notary in the sections read is not proof that no other North Carolina law requires one.
Common mistakes
- Charging more than the limit in North Carolina, which the table gives as loans up to $25,000 capped by formula and above that any agreed rate, can mean forfeiting the entire interest if the overcharge is knowing, and the borrower may recover twice the interest paid.
- Leaving the rate out: the legal rate of 8% applies when a note names none, and it is rarely what the parties meant.
- Waiting too long to enforce: North Carolina allows 6 years (UCC note) 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
- G.S. 24-1.1 Contract rates and fees: https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_24/GS_24-1.1.html
- G.S. 24-1 Legal rate is eight percent: https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_24/GS_24-1.html
- G.S. 24-2 Penalty for usury: https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_24/GS_24-2.html
- G.S. 25-3-118 Statute of limitations: https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_25/GS_25-3-118.html
- G.S. 25-3-401 Signature necessary for liability on instrument: https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_25/GS_25-3-401.html
Sources: the primary documents linked above, read on October 11, 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.