Tennessee Usury Laws
The State of Tennessee has established usury limitations when it comes to personal loans. In this regard, the intent is to protect consumers in the state from unscrupulous lenders. Generally speaking, the general usury limit in Tennessee is either 24% or four points above the average prime loan rate, whichever is less at the time the personal loan is entered into.
The usury limit or cap that is on the books in Tennessee is one of the highest and most liberal to be found anywhere in the United States today. Because of this, when it comes to enforcing these statutory provisions, courts tend to take a very restrictive view of what is permissible.
In this regard, if a court is asked to deal with a personal loan agreement that carries with it interest in an amount greater that 24%, in nearly every instance the court will declare the loan agreement to be an illegal contract. By declaring the loan agreement to be an illegal contract in such an instance, in such a situation, the contract will be deemed void. Because the contract will be declared void, it is wholly unenforceable.
Banks, savings and loans, and credit unions that have state charters from Tennessee are subject to a separate set of statutory provisions that govern interest rates which can be charged. Moreover, if the loan or financing agreement is part of a commercial transaction involving the sale of goods, there is a yet another statutory scheme within the statutes of Tennessee that govern acceptable -- legal -- interest rates that can be included as part of such commercial transaction agreements.
The general statutory provisions in Tennessee that do govern usury and personal loans can be found in the Tennessee Code at Titles 45 and 47. As referenced, there are other provisions that deal with and address other types of lending arrangements that take place in Tennessee.
Nothing in this article should be construed as providing you legal advice in regard to usury laws or related financial matters. If you have any specific questions or concerns after reading this article, you should consult with an attorney. Additionally, we do take all reasonable steps necessary to keep the information and materials up to date and accurate. However, the statutes governing loans and interest rates in Tennessee are altered from time to time.