Legal Question in Banking Law in New York
Interest charged on a loan
Recently loaned someone $15000 to be paid back at $250/mo plus an interest of 5% over a 5 yr. period. I disputed the $24/mo interest being paid to me and when I asked why it was so low was told that he was using a ''simple interest loan in order to buy down with extra payments'' and not a compound interest loan, ''a front loaded loan, a sum of the eights loan.'' Under the law he said I was not entitled to do that type of loan as it is reserved for the banks to money. Is he right in stating this, or am I having the wool pulled over my eyes?
1 Answer from Attorneys
Re: Interest charged on a loan
It depends on what your agreement says. Parties may charge each other any rate of interest that is not usurious. There is no reservation of "compound" interest to banks. If your agreement provides for compound interest, then you're entitled to it. If there's no written agreement, then it's your word agaisnt his.
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