What is the highest legal interest rate on a personal loan?

Asked by: Peggie Olson  |  Last update: March 16, 2025
Score: 5/5 (41 votes)

The bottom line There's no federal regulation on the maximum interest rate that your issuer can charge you, though each state has its own approach to limiting interest rates. State usury laws often dictate the highest interest rate that can be charged on loans, but these often don't apply to credit cards.

What is the highest interest rate allowed on a personal loan?

In California, absent an exception which we discuss in depth below, the maximum allowable interest rate for consumer loans is 10% per year. For non-consumer loans, the interest rate can bear the maximum of whichever is greater between either: i) 10% per annum; or ii) the “federal discount rate” plus 5%. Cal.

What is an illegal interest rate?

A usury interest rate is an interest rate deemed to be illegally high. To discourage predatory lending and promote economic activity, states may enact laws that set a ceiling on the interest rate that can be charged for certain types of debt. Interest rates above this ceiling are considered usury and are illegal.

What is the maximum interest rate for a personal loan?

Most banks charge personal loan interest rates between 10.50% to 24% p.a. The interest rate that you are charged will vary based on a number of factors such as your credit score, your income, the company that you are employed with, your age at the time of applying for the loan, etc.

What is too high of an interest rate for a personal loan?

Avoid loans with APRs higher than 10% (if possible)

"That is, effectively, borrowing money at a lower rate than you're able to make on that money."

How Principal & Interest Are Applied In Loan Payments | Explained With Example

28 related questions found

What is the highest interest rate you can charge on a private loan?

We'll kind of go a little bit more in depth on how that's calculated based on your interest rate and points on a few slides. But yeah, so big picture California says 10%, that's what you can charge on a loan and if you exceed 10%, you have a usury problem.

Is 7% a good rate for a personal loan?

A good personal loan interest rate is typically one that's lower than the national average rate, which is 12.17% as of Q3 2023. Because interest rates can vary based on a number of factors, including economic conditions, that average can fluctuate over time.

How high can interest rates go legally?

There is no federally mandated maximum interest rate for credit cards. For credit cards, the CARD Act offers various protections and provides more transparency when it comes to rates.

What is a prohibited interest?

Prohibited Interest means an interest in a contract with the Government or a state-owned enterprise, the acquisition of which by a specified person in public life is prohibited by rules made undersection 22; Sample 1Sample 2.

What does the Bible say about interest on loans?

Deuteronomy 23:19 New King James Version (NKJV)

You shall not charge interest to your brother—interest on money or food or anything that is lent out at interest.

What interest rate is considered too high?

What is high-interest debt? Although there is no strict definition for high-interest debt, many experts classify it as anything above the average interest rates for mortgages and student loans. These typically range between 2% and 7%, meaning that interest rates of 8% and above are considered high.

What is the maximum for a personal loan?

Most lenders state that their maximum personal loan amount is $50,000, though some will go as high as $100,000. Some borrowers, usually wealthy and with high credit scores, might be able to borrow more.

What is the illegal interest rate in the US?

Under the criminal usury statute, the maximum interest that can be charged is 25%.

What rate is too high for a personal loan?

A good interest rate on a personal loan is anything lower than the market's average rate. But a good rate for you depends on your credit score. For example, if you have excellent credit, a rate below 11 percent would be considered good, while 12.5 percent would be less competitive.

Which bank gives you the highest interest rate?

Best High-Yield Savings Account Rates for January 2025
  • Vio Bank – 4.56% APY.
  • CFG Bank – 4.52% APY.
  • Bask Bank – 4.50% APY.
  • Jenius Bank – 4.50% APY.
  • Bread Savings – 4.50% APY.
  • Poppy Bank – 4.50% APY.
  • Bank5 Connect – 4.50% APY.
  • My Banking Direct – 4.45% APY.

What is a good rate on a personal loan right now?

The average personal loan interest rate for consumers with good credit (690 to 719 credit score) is currently 14.06%, according to aggregate, anonymized offer data from users who pre-qualified for a personal loan through NerdWallet.

Is it legal to charge interest on a personal loan?

The Basic Rate: The California Constitution allows parties to contract for interest on a loan primarily for personal, family or household purposes at a rate not exceeding 10% per year. Note that as with all other percentages we are listing, this percentage is based on the unpaid balance.

How much is a $20,000 loan for 5 years?

A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05. That same wise shopper will look not only at the interest rate but also the length of the loan.

How hard is it to get approved for a $5000 loan?

Credit scores of 580 or under are considered "poor." A low credit score can significantly limit your chances of getting approved for a $5,000 loan. Most lenders require a minimum score around 670, which is considered a "fair" score.