Legal Question in Credit and Debt Law in North Carolina

is there a limit to the interest rate charged for a car loan in the state of NC?

Asked on 4/29/13, 7:01 am

2 Answers from Attorneys

Kenneth Love Ken Love Law
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Yes, there is but it depends in part on the amount of the car loan. Without knowing your loan amount, an answer cannot be given. You can search for Chapter 24 of the North Carolina General Statutes which set out the laws for most interest rate limits in NC.

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Answered on 4/29/13, 10:01 am
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It depends on whether loan is more or less than $25,000. If its over $25,000, the sky's the limit - the rate can be whatever the parties agree to. If its less than $25,000, the maximum rate of interest has held steady at 16% since 1984.

However, I have seen car loans as high as 18%. The statute and rate table is set forth below.

Since the NC Commissioner of Banks sets interest rates, if you have questions, you might want to check with the commissioner's office and make sure the rate does not violate the usury laws.

24‑1.1. Contract rates and fees.

(a) Except as otherwise provided in this Chapter or other applicable law, the parties to a loan, purchase money loan, advance, commitment for a loan or forbearance other than a credit card, open‑end, or similar loan may contract in writing for the payment of interest not in excess of:

(1) Where the principal amount is twenty‑five thousand dollars ($25,000) or less, the rate set under subsection (c) of this section; or

(2) Any rate agreed upon by the parties where the principal amount is more than twenty‑five thousand dollars ($25,000).

(b) As used in this section, interest shall not be deemed in excess of the rates provided where interest is computed monthly on the outstanding principal balance and is collected not more than 31 days in advance of its due date. Nothing in this section shall be construed to authorize the charging of interest on committed funds prior to the disbursement of said funds.

(c) On the fifteenth day of each month, the Commissioner of Banks shall announce and publish the maximum rate of interest permitted by subdivision (1) of subsection (a) of this section on that date. Such rate shall be the latest published noncompetitive rate for U.S. Treasury bills with a six‑month maturity as of the fifteenth day of the month plus six percent (6%), rounded upward or downward, as the case may be, to the nearest one‑half of one percent (1/2 of 1%) or sixteen percent (16%), whichever is greater. If there is no nearest one‑half of one percent (1/2 of 1%), the Commissioner shall round downward to the lower one‑half of one percent (1/2 of 1%). The rate so announced shall be the maximum rate permitted for the term of loans made under this section during the following calendar month when the parties to such loans have agreed that the rate of interest to be charged by the lender and paid by the borrower shall not vary or be adjusted during the term of the loan. The parties to a loan made under this section may agree to a rate of interest which shall vary or be adjusted during the term of the loan in which case the maximum rate of interest permitted on such loans during a month during the term of the loan shall be the greater of the rate announced by the Commissioner in (i) the preceding calendar month or (ii) the calendar month preceding that in which the rate is varied or adjusted.

(d) Any bank or savings institution organized under the law of North Carolina or of the United States may charge a party to a loan or extension of credit governed by this section a fee for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit, such fee not to exceed the greater of one‑quarter of one percent (1/4 of 1%) of the balance outstanding at the time of the modification, renewal, extension, or amendment of terms, or fifty dollars ($50.00).

(e) Any bank or savings institution organized under the law of North Carolina or of the United States may charge a party to a loan or extension of credit not secured by real property governed by this section an origination fee not to exceed the greater of one‑quarter of one percent (1/4 of 1%) of the outstanding balance or fifty dollars ($50.00).

(f) This section shall not be construed to limit fees on loans or extensions of credit in excess of three hundred thousand dollars ($300,000).

http://www.nccob.org/Public/docs/News/Pub And Research/Maximum_Rate_of_Interest.pdf

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Answered on 4/29/13, 5:17 pm

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