Is it legal for an individual to give a personal loan with 24% non-compounded interest in state of California?
†?!?K †??K² asked:
My employer asked me to give her a loan. She said she will pay 2% of the total borrowed amount per month and at the end of the year, return the original borrowed amount. I figured this is 24% APR interest rate. Is this legal for me to do?
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My employer asked me to give her a loan. She said she will pay 2% of the total borrowed amount per month and at the end of the year, return the original borrowed amount. I figured this is 24% APR interest rate. Is this legal for me to do?
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Tags: Compounded Interest, State California, State Of California
May 18th, 2009 at 9:25 am
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Technically, you might fall afoul of some usury laws, but in the rare case that would happen, a simple defense would be to point to credit cards that charge higher than that.. So legally, I think you are ok.
What I would be careful of is loaning money to an employer. Worst case scenario, what if she fires you and refuses to pay? It could put stress on your work relationship.
If you do go this route, make sure the loan is in writing, and all payment amounts and dates are specified, as well as penalties for past due payments (you can make those optional).
May 19th, 2009 at 10:13 am
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Setting aside the manifest problems of employees lending money to employers, this interest rate is unconstitutional, statutorily prohibited, and thus legally unenforceable. (See Cal. Const., art. 15, sec. 1.) “But,” I hear, “my credit card rate is higher than that!” Yes it is, because the California laws do not apply to banks.