The maximum interest rate allowed by law depends on where you live, who the lender is, and what kind of loan you took. Every state sets its own limits. Some states cap most consumer loans at 36% a year. Others allow much higher rates for payday and installment loans. This guide covers the rules on lending rates, explains the main exceptions, and shows you where to check the figure for your own state.
- What Is the Maximum Interest Rate Allowed by Law?
- Why Is There No Single National Interest Rate Cap?
- How Does the Maximum Interest Rate Allowed by Law Vary by State?
- What Are the Payday Loan Rules in My State?
- How Do I Know If a Loan Goes Over the Maximum Interest Rate Allowed by Law?
- What Happens If a Lender Charges More Than the Maximum Interest Rate Allowed by Law?
- Are Online and Tribal Lenders Bound by the Maximum Interest Rate Allowed by Law?
- Do Interest Caps Apply to Credit Cards and Car Loans?
- Does the Maximum Interest Rate Allowed by Law Apply to Old Debts and Judgments?
- What Can a Lender Do If I Fall Behind on a High-Rate Loan?
- How Can I Use the Maximum Interest Rate Allowed by Law Before I Sign?
- Where Do I Find the Exact Figure for My State?
- Frequently Asked Questions
What Is the Maximum Interest Rate Allowed by Law?
The maximum interest rate allowed by law is the highest rate a lender may charge under a usury statute. “Usury” just means charging more interest than the law permits. The Legal Information Institute at Cornell defines usury as charging an illegally high rate. Each state writes its own usury law. As a result, the cap in one state can be very different from the cap next door.
Most states use more than one cap. Typically there is a general rate for ordinary loans and contracts. Then there are separate rules for licensed lenders, credit cards, car loans, and payday loans. For example, a state might cap a personal loan between two people at 10%. In the same state, a licensed installment lender could legally charge 30% or more.
The rate that matters is usually the annual percentage rate, or APR. Under the federal Truth in Lending Act, lenders must show you the APR before you sign. The APR includes interest plus many required fees. That makes it the best number for comparing a loan with your state’s cap.
Why Is There No Single National Interest Rate Cap?
Congress has never passed a general usury cap for all consumer loans. Instead, rate limits have mostly been left to the states. However, two federal rules change the picture in important ways.
The first is rate “exportation.” Under 12 U.S.C. § 85, a national bank may charge the rate allowed in its home state. It can apply that rate to borrowers anywhere in the country. The Supreme Court upheld this in 1978. State-chartered banks got a similar power under 12 U.S.C. § 1831d. As a result, many credit card banks are based in states with no meaningful cap, such as South Dakota or Delaware. Your own state’s cap often does not apply to a bank credit card.
The second is the Military Lending Act. It caps most consumer credit to active-duty service members and their dependents at a 36% “military annual percentage rate.” That rate includes most fees, insurance charges and add-on products. The rule is in 10 U.S.C. § 987 and 32 CFR Part 232.
| Federal rule | What it does | Where it is written |
|---|---|---|
| National bank exportation | Lets a national bank charge its home-state rate nationwide | 12 U.S.C. § 85 |
| State bank exportation | Gives FDIC-insured state banks the same power | 12 U.S.C. § 1831d |
| Military Lending Act | Caps covered credit to active-duty members at 36% MAPR | 10 U.S.C. § 987; 32 CFR Part 232 |
| Truth in Lending Act | Requires the APR to be disclosed before you sign | 15 U.S.C. § 1601; 12 CFR Part 1026 |
How Does the Maximum Interest Rate Allowed by Law Vary by State?
The gap between states is large. In most states, the general usury rate is somewhere between 6% and 18%. However, that general rate often does not cover licensed lenders. So the maximum interest rate allowed by law for your loan may be far higher than the headline number.
Here are five states with clear statutes. These figures come from each state’s own law. They show how differently states handle the same question.
| State | General cap | Key detail | Statute |
|---|---|---|---|
| New York | 16% civil usury rate | 25% is criminal usury | Gen. Oblig. Law § 5-501; Banking Law § 14-a; Penal Law § 190.40 |
| Florida | 18% simple interest per year | Applies to loans up to $500,000; over 25% is criminal usury | Fla. Stat. §§ 687.02, 687.071 |
| California | 10% per year | Many lenders are exempt, including banks and licensed lenders | Cal. Const. art. XV, § 1 |
| Arkansas | 17% per year | Written into the state constitution | Ark. Const. amend. 89 |
| Illinois | 36% APR on most consumer loans | Covers payday, installment and title loans | 815 ILCS 123 (Predatory Loan Prevention Act) |
Notice the California example. The 10% cap sounds strict. However, the constitution exempts banks, credit unions, and lenders licensed under the state’s finance laws. For example, California’s Financing Law caps many loans between $2,500 and $9,999 at about 36% plus the federal funds rate. So the rate that applies depends on the lender’s license, not just the state.
Our maximum interest rate by state page lists the general cap, the licensed-lender rules and the statute for every state. Each figure links back to the source.
What Are the Payday Loan Rules in My State?
Payday loans get their own rules in almost every state. These are small, short loans, usually due on your next payday. Fees are often set per $100 borrowed, not as an annual rate. When you convert those fees to APR, the number can top 300%.
States take three main approaches. Some ban high-cost payday loans by applying a 36% cap. Others allow payday lending with limits on loan size, fees and repeat borrowing. A few allow it with very few limits. In most states, the payday statute overrides the general usury cap.
| State | Max loan | Fee or rate limit | Statute |
|---|---|---|---|
| California | $300 (face value of check) | 15% of the check, so $45 on $300; term up to 31 days | Cal. Fin. Code §§ 23035, 23036 |
| Florida | $500 | 10% of the amount plus a $5 verification fee; term 7 to 31 days | Fla. Stat. § 560.404 |
| Ohio | $1,000 | 28% yearly interest plus a monthly fee of 10% or $30, whichever is less; total cost capped at 60% of principal | Ohio Rev. Code § 1321.40 |
| Colorado | Varies by lender | 36% APR cap, approved by voters in 2018 | C.R.S. § 5-3.1-105 |
| Washington | $700 or 30% of gross monthly income, whichever is less | 15% on the first $500, 10% above; no more than 8 loans in 12 months | RCW 31.45.073 |
Some states also require a waiting period between loans. This is called a cooling-off period. It stops a borrower from taking a new loan the moment the old one is paid.
You can compare fees, loan sizes and waiting periods side by side on our payday loan rates by state page.
How Do I Know If a Loan Goes Over the Maximum Interest Rate Allowed by Law?
Start with the loan paperwork. Federal law requires a Truth in Lending box on most consumer loans. It shows the APR, the finance charge, the amount financed and the total of payments. The APR is the number to compare.
Next, find which cap applies. Ask three questions. First, what state law governs the loan? Second, what type of lender made it: a bank, a licensed lender, a payday lender, or a private person? Third, what kind of loan is it? The answers tell you which statute sets the maximum interest rate allowed by law for that loan.
Then compare the numbers. If the APR is higher than the cap, the loan may be worth a closer look. However, be careful. Some fees are not counted as interest under state law. Some loans fall under an exemption. For example, a bank card may be governed by another state’s law entirely.
To save time, try the free maximum interest rate lookup. You enter your state and loan type. It then shows the cap that generally applies, with the statute behind it.
What Happens If a Lender Charges More Than the Maximum Interest Rate Allowed by Law?
The penalty depends on the state. Some states only cancel the extra interest. Others cancel all interest. A few void the whole loan. In serious cases, charging above a criminal usury rate can be a crime.
| State | What the statute generally provides | Statute |
|---|---|---|
| New York | A loan above the civil usury rate can be void; above 25% is a felony-level crime | Gen. Oblig. Law § 5-511; Penal Law § 190.40 |
| Florida | A lender that willfully overcharges forfeits all interest; over 25% is a misdemeanor and over 45% is a felony | Fla. Stat. §§ 687.04, 687.071 |
| Illinois | A loan above 36% APR is null and void; no one may collect principal, interest or fees | 815 ILCS 123/15-5-10 |
| Colorado | A payday loan above the cap is void, and the borrower generally owes no fees or interest | C.R.S. § 5-3.1-105 |
These are what the statutes say on paper. Whether they apply to one specific loan depends on many facts. Courts look at the lender’s license, the loan terms, and whether an exemption applies. As a result, confirm with the statute or a licensed attorney before you rely on any of these outcomes.
You can also file a complaint. The Consumer Financial Protection Bureau takes complaints at consumerfinance.gov. Your state’s financial regulator or attorney general also licenses and polices lenders. A complaint creates a record and may prompt a response from the lender.
Are Online and Tribal Lenders Bound by the Maximum Interest Rate Allowed by Law?
This is one of the most confusing areas. Many online lenders operate from another state or another country. Some claim ties to a Native American tribe. They may argue your state’s cap does not reach them.
State regulators often disagree. In most states, a lender that makes loans to residents must hold a state license. Several state attorneys general have taken action against unlicensed online lenders. The Federal Trade Commission has also brought cases against online payday lenders over deceptive terms and illegal collection.
Another setup is the “rent-a-bank” model. Here, a nonbank lender partners with a bank so it can use the bank’s exported rate. Some states, such as Illinois, have rules to look past this setup. Under the Illinois law, the state looks at who holds the real economic interest in the loan.
If you are unsure, check whether the lender is licensed in your state. Your state’s financial regulator usually has a free license search on its .gov website. An unlicensed lender is a warning sign worth noting.
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Do Interest Caps Apply to Credit Cards and Car Loans?
Credit cards are usually the biggest exception. Because of exportation, most card banks charge the rate their home state allows. As a result, your state’s usury cap often does not limit your card APR. Federal rules still apply, however.
The Credit CARD Act of 2009 added several protections. For example, a card issuer generally must give you 45 days’ notice before raising your rate on new purchases. In most cases, it cannot raise the rate on an existing balance unless you are 60 days late.
Car loans are different again. Many states have separate motor vehicle finance laws with their own rate caps. These caps often depend on the age of the car. For example, a newer car may carry a lower cap than a car that is several years old. Check your state’s vehicle sales finance statute for the exact figure.
Home loans carry another federal protection. If you refinance or take a home equity loan secured by your main home, you often get a right to cancel.
Does the Maximum Interest Rate Allowed by Law Apply to Old Debts and Judgments?
Yes, in a few ways. If a collector sues on an old loan, the interest it claims must generally follow the contract and state law. A collector usually cannot add interest the original contract did not allow. The federal Fair Debt Collection Practices Act bars collecting any amount not authorized by the agreement or by law. That rule is at 15 U.S.C. § 1692f(1).
Once a court enters a judgment, a new rate usually takes over. This is called post-judgment interest. Each state sets it by statute. For example, California generally applies 10% a year to most money judgments. New York generally applies 9%. Some states tie the rate to a market index that changes each year. Our judgment calculator applies your state’s rate to the judgment amount and date.
Judgments also expire or must be renewed after a set number of years. The judgment expiration by state page lists each state’s period and renewal rules.
Older debts have another time limit. The statute of limitations sets how long a creditor has to sue. After it runs, a lawsuit may be time-barred. The debt statute of limitations by state page shows the period for each type of debt.
What Can a Lender Do If I Fall Behind on a High-Rate Loan?
A lender’s tools are set by law. Before a lawsuit, it may call, write, or report the debt to the credit bureaus. It must follow the debt collection rules while doing so. Our debt collection laws by state page covers what collectors may and may not do.
Many payday lenders hold access to your bank account. They may try to withdraw payments directly. The CFPB’s payday rule limits repeated failed withdrawal attempts. Under that rule, after two failed attempts in a row, a covered lender generally needs your new permission to try again. Check consumerfinance.gov for the current status of that rule.
To take money from your bank account without your consent, a lender typically needs a court judgment first. Then it can seek a bank levy or garnishment. However, some funds are protected. Federal benefits like Social Security get an automatic two-month protection under 31 CFR Part 212. States add their own exemptions. The bank account garnishment laws by state page explains each state’s protected amounts.
How Can I Use the Maximum Interest Rate Allowed by Law Before I Sign?
The best time to check a rate is before you sign. Knowing the maximum interest rate allowed by law gives you a benchmark. It helps you spot an offer that looks out of line.
Here is a simple process. First, ask for the APR in writing. Second, look up the maximum interest rate allowed by law for that loan type in your state. Third, confirm the lender is licensed by your state regulator. Fourth, read the total of payments, not just the monthly payment. Finally, note any cooling-off or cancellation rights.
Also compare other options. Credit unions offer small-dollar loans called Payday Alternative Loans. Under federal credit union rules, these carry a maximum APR of 28%. That cap is set by the National Credit Union Administration at 12 CFR § 701.21(c)(7)(iii). Some employers and nonprofits also offer small emergency loans.
If a debt is small and you disagree with a charge, small claims court may be an option for either side. Limits vary widely. The small claims court limits by state page lists the dollar ceiling in each state.
Where Do I Find the Exact Figure for My State?
The exact rule is set by each state. Each state’s own page on this site carries the figure, the statute and the sources. You can reach every state from the master pages linked in this guide. We do not guess at numbers. Every cap comes from the statute on the state legislature’s website, then the state regulator or attorney general.
Our free tools apply the state rule to your own numbers. The lookup shows the maximum interest rate allowed by law for your loan type. The judgment calculator works out post-judgment interest. The statute of limitations calculator estimates when the time to sue may run out.
Laws change. For example, several states have adopted 36% caps in recent years by law or by ballot measure. Always check the effective date on the statute. When the stakes are high, confirm with the statute or a licensed attorney in your state.
Frequently Asked Questions
Is 36% the maximum interest rate allowed by law everywhere?
No. A 36% cap applies to active-duty service members under the Military Lending Act. Some states, such as Illinois and Colorado, also use 36% for many consumer loans. However, other states allow higher rates, and bank credit cards often follow their home state’s rules instead.
Can a loan be canceled if the rate is too high?
In some states, yes. Illinois, for example, treats a loan above 36% APR as void. Other states only cancel the extra interest. The result depends on the statute and the facts, so confirm with the statute or a licensed attorney.
Does my state’s cap apply to my credit card?
Often it does not. National and state banks may export their home state’s rate under federal law. However, the federal CARD Act still limits how and when a card issuer can raise your rate.
Maximum interest rate allowed by law: Quick Recap
If you remember one thing about maximum interest rate allowed by law, make it this: the rule is set by your state’s statute and its courts, not by the officer, the dealer or the lender in front of you, and the official source is linked above. Every figure on this page about maximum interest rate allowed by law should be confirmed with the statute or a licensed attorney before you act on it.
Questions about maximum interest rate allowed by law that this page does not answer are usually answered on your state’s own guide on this site, which carries the figure, the statute citation and the agency to call — and, for a dealer, a lender or a shop that will not budge, by the attorney general complaint line.
Look up the rate cap for your situation
Pick the state and whether a rate was written down; the lookup shows the legal rate, the contract cap and the criminal usury line.
Sources & How to Verify
The figures on this page come from statutes, court opinions and official government sources. Suspension lengths, deadlines and vehicle-code rules change, so always confirm the exact figure with the statute or a licensed attorney before acting.
- Your state’s statute and agency: the official source for your state’s exact figure, deadline and form — cited with its verified date on your state’s page on this site
- Consumer Financial Protection Bureau: nhtsa.gov — the federal road-safety agency behind every state program
- Your state legislature: the statute text cited on each state page
Content last reviewed October 2026. If you notice an outdated figure, please contact us.
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Informational only — not legal advice. Bonus Bank Daily is an independent educational resource, not a law firm, not a police department, not a DMV and not a government agency, and this page does not provide legal advice. Traffic-stop, DUI and vehicle-code rules change and vary by state; confirm the exact rule with the statute or a licensed attorney before you act.