Legal Question in Credit and Debt Law in New York
Interest on private loan to friend
I am making a loan to a friend and i wanted to know if there is a legal limit to what you are allowed to charge someone in interest when you are making a private loan to an individual.
2 Answers from Attorneys
Re: Interest on private loan to friend
Yes, there are legal limits to the interest rates you can charge for lending money. The usuary laws, as they are called, vary from state-to-state, but typically are in excess of 21% or so.
If you are lending money and creating a promissory note, you must be quite careful to ensure your rights are protected. The drafting of such a note takes a certain amount of expertise if you want to get the most out of it.
Good luck.
Re: Interest on private loan to friend
The information to follow is only for NY State. Unlike advice given by Mr. Ashman, I will not comment on the practices in other states.
Pursuant to NY Banking Law � 14-a (2000) , "The maximum rate of interest provided for in section 5-501 of the general obligations law shall be sixteen per centum (16%) per annum." If you charge an interest rate in excess of 25% per annum, you will violate criminal statutes.
Mike.
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