Updated October 11, 2026. Quick answer: The higher of 12% a year or four percentage points above the 26-week Treasury bill yield, so 12% is the floor of the ceiling, and 12% a year applies when no different rate is agreed to in writing (RCW 19.52).
Washington promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | The higher of 12% a year or four percentage points above the 26-week Treasury bill yield |
| Rate if the note names none | 12% a year |
| Penalty for charging too much | A usurious contract is not void: the creditor recovers only principal less the interest accruing at the contract rate (principal less twice the interest paid and less accrued unpaid interest if interest has been paid), and the debtor gets costs, reasonable attorneys’ fees and the amount paid over what the creditor is entitled to; the action is barred for a loan to a corporation engaged in a trade or business for that business unless a natural person is also liable beyond principal plus lawful interest |
What Washington law says about interest
Any rate is legal if it does not exceed the higher of 12 percent per annum or four percentage points above the 26-week Treasury bill coupon yield as determined at the first bill auction in the calendar month before the rate is set by written agreement (or adjusted), so 12 percent is the floor of a floating ceiling; prejudgment interest on medical debt is capped at nine percent.
Absent a different rate agreed to in writing, a loan or forbearance bears interest at twelve percent per annum, except that prejudgment interest on medical debt must not exceed nine percent.
A usurious contract is not void: the creditor recovers only principal less the interest accrued at the contract rate (less twice interest already paid), and the debtor gets costs and attorneys’ fees; the penalty action is barred for loans to a business corporation unless a natural person is also liable beyond principal plus lawful interest.
The sources in their own words
- Interest limit: “the higher of: (a) Twelve percent per annum” (RCW 19.52.020 Highest rate permissible: Setup charges).
- Interest limit: “four percentage points above the equivalent coupon issue yield” (RCW 19.52.020 Highest rate permissible: Setup charges).
- Rate when none is agreed: “shall bear interest at the rate of twelve percent per annum” (RCW 19.52.010 Rate in absence of agreement).
- Exemption or penalty: “the contract shall be usurious, but shall not, therefore, be void” (RCW 19.52.030 Usury: Penalty upon suit on contract).
- Time limit to sue: “An action upon a contract in writing” (RCW 4.16.040 Actions limited to six years).
- Time limit to sue: “within six years after the due date or dates stated” (RCW 62A.3-118 Statute of limitations).
- Signature: “written undertaking to pay money signed by the person undertaking to pay” (RCW 62A.3-103 Definitions).
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Signing the note: signature, witness, notary
Washington’s enacted UCC 3-103 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 Washington 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 upon a contract in writing must be commenced within six years, and a note payable at a definite time within six years after its due date.
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 Washington 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 current Treasury bill yield, and so the current ceiling, is not stated on this page; 12% is the floor of the ceiling.
- Silence on a witness or notary in the sections read is not proof that no other Washington law requires one.
Common mistakes
- Charging more than the limit in Washington, which the table gives as 12% or 4 points above the 26-week T-bill yield, if higher, makes the contract usurious but not void: the creditor is entitled only to principal less the interest accruing at the contract rate (less twice the interest already paid), and the debtor recovers costs and reasonable attorneys’ fees.
- Leaving the rate out: the legal rate of 12% applies when a note names none, and it is rarely what the parties meant.
- Waiting too long to enforce: Washington 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
- RCW 19.52.020 Highest rate permissible: Setup charges: https://app.leg.wa.gov/RCW/default.aspx?cite=19.52.020
- RCW 19.52.010 Rate in absence of agreement: https://app.leg.wa.gov/RCW/default.aspx?cite=19.52.010
- RCW 19.52.030 Usury: Penalty upon suit on contract: https://app.leg.wa.gov/RCW/default.aspx?cite=19.52.030
- RCW 4.16.040 Actions limited to six years: https://app.leg.wa.gov/RCW/default.aspx?cite=4.16.040
- RCW 62A.3-118 Statute of limitations: https://app.leg.wa.gov/RCW/default.aspx?cite=62A.3-118
- RCW 62A.3-103 Definitions: https://app.leg.wa.gov/RCW/default.aspx?cite=62A.3-103
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.