All of us use credit to one extent or another, and businesses many time are either successful or fail depending upon how they use their credit. Understanding rates of interest and what is legal is important to managing your business. Usury “refers to the charging of an exorbitant interest rate on a loan” as quoted from the Texas Attorney General’s website.
Business or commercial loans are made for business operations or investor and are governed by Chapter 306 of the Texas Finance Code. These loans can bear an interest rate of eighteen percent (18%) annually but may float with inflaction up to twenty four percent (24%), with loans exceeding two hundred and fifty thousand ($250,000) being able to go up to twenty eight percent (28%) annually. The law governed motor vehicle sales makes the highest rate capped at twenty seven percent (27%), but pawn shops can charge as high as two hundred and forty percent (240%) annually – yup, that’s right!
Consumer (personal, family, and household use) loans vary greatly in their structure and the usury laws have a lot of interesting interactions and are governed by Chapter 342 of the Texas Finance Code. Other rates:
- Without an agreement, six percent (6%) annually is the cap.
- With an oral agreement, ten percent (10%) annually.
- Credit cards interest from banks domiciled in Texas are capped at eighteen percent (18%), but outside of Texas the credit card companies can charge much higher – take a look at the bank’s charter to see which state they are issuing your credit cards from.
- Business or commercial loans maximize interest rates change depending upon if you are represented by counsel as well.
All in all, I have seen just about everything, and a lot that is apparently not legal. If you have more detailed information that you’d like to post here, please feel free to comment, and we’ll get to the bottom of what you are working with.