Updated October 11, 2026. Quick answer: 12% a year, and a contract above that is void (Code of Virginia section 6.2-303); when there is an obligation to pay interest but no express rate, the legal rate is 6%.
Virginia promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 12% a year unless another law permits a higher rate |
| Rate if the note names none | 6% a year |
| Penalty for charging too much | A contract made in violation of the limit is void, and no principal, interest or fees may be collected |
What Virginia law says about interest
Virginia law says no contract may be made for interest on a loan at a rate that exceeds 12 percent per year unless another law permits a higher rate.
The legal rate is an annual rate of six percent and is implied when interest is owed but no rate is agreed.
A contract made in violation of the 12 percent limit is void and no principal, interest or fees may be collected; the limit does not apply where another law permits a higher rate (the statute lists, without limitation, laws on consumer finance companies, short-term loans, motor vehicle title lenders, Virginia Housing Development Authority loans, insurance agents, premium finance companies, pawnbrokers and third-party tax payment agreements) or where usury cannot be pleaded.
The sources in their own words
- Interest limit: “at a rate that exceeds 12 percent per year” (Code of Virginia 6.2-303 Contracts for more than legal rate of interest).
- Exemption or penalty: “Any contract made in violation of this section is void” (Code of Virginia 6.2-303 Contracts for more than legal rate of interest).
- Rate when none is agreed: “legal rate of interest shall be an annual rate of six percent” (Code of Virginia 6.2-301 Legal rate of interest).
- Time limit to sue: “within six years after the due date or dates stated” (Code of Virginia 8.3A-118 Statute of limitations).
- Time limit to sue: “this section shall apply to negotiable and non-negotiable notes” (Code of Virginia 8.3A-118 Statute of limitations).
- Signature: “written undertaking to pay money signed by the person undertaking to pay” (Code of Virginia 8.3A-103 Definitions).
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Signing the note: signature, witness, notary
Virginia’s enacted UCC section 8.3A-103 defines a promise as a written undertaking to pay money signed by the person undertaking to pay. A note is signed by the person who promises to pay.
None of the sections read for Virginia 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
An action to enforce a note payable at a definite time must be commenced within six years after the due date, and 8.3A-118 applies to negotiable and non-negotiable notes notwithstanding the general five-year written-contract rule.
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 7% a year, paid monthly. With r = 7%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $396.02 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $23,761.20 in total, of which $3,761.20 is interest.
The 7% rate sits inside the Virginia 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
- Section 6.2-303(B) lists, without limitation, the laws that permit more than 12 percent a year; the documents read do not say whether a private family loan could fall under any of them or under the provision for loans on which usury cannot be pleaded.
- Silence on a witness or notary in the sections read is not proof that no other Virginia law requires one.
Common mistakes
- Charging more than the limit in Virginia, which the table gives as 12% a year, makes the contract void, and no one may collect, receive or retain any principal, interest, fees or other charges under it (Code of Virginia 6.2-303(F)).
- Leaving the rate out: the 6% legal rate is implied only when there is an obligation to pay interest and no express contract to pay interest at a specified rate, and it is rarely what the parties meant.
- Waiting too long to enforce: Virginia 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
- Code of Virginia 6.2-303 Contracts for more than legal rate of interest: https://law.lis.virginia.gov/vacode/title6.2/chapter3/section6.2-303/
- Code of Virginia 6.2-301 Legal rate of interest: https://law.lis.virginia.gov/vacode/title6.2/chapter3/section6.2-301/
- Code of Virginia 8.3A-118 Statute of limitations: https://law.lis.virginia.gov/vacode/title8.1A/chapter3/section8.3A-118/
- Code of Virginia 8.3A-103 Definitions: https://law.lis.virginia.gov/vacode/title8.1A/chapter3/section8.3A-103/
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.