The Learning Curve

New tricks for an old dog.

Legal rate of interest

From the free legal advice department  –

If while browsing various state stautes one happens across the phrase, “the legal rate of interest in this state is  ___%,” it likely doesn’t mean what you hope it means.

This isn’t a usury statute.  A usury statute reads like, “It is illegal to charge more than ____% interest in this state,” and it usually has a lot of exceptions and qualification in other parts of the statutory code that are difficult to find and figure out, so it may not apply to your particular situation anyway.   Be careful.

The phrase “legal rate of interest” simply means the interest rate that applies when there is no agreement or rule indicating another rate.  Frequently it is the rate used for prejudgment interest, but not always, and it may be subject to the discretion of the court entering the judgment.  The interest rate imposed after a judgment is entered is usually yet a different rate, and it is specified by a separate law hidden somewhere else.

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Written by Tom Fox

02/28/2009 at 9:37 pm

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