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socrateaser, Attorney

Category: Bankruptcy Law

Satisfied Customers: 37810

Experience: Attorney and Real Estate Broker -- Retired (mostly)

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I loaned a friend 10 K six months ago. He was to pay me back

Customer Question

I loaned a friend 10 K six months ago. He was to pay me back within 60 days plus 4 K as interest. After 60 days a 1K penalty was to be added to the total if he did not pay. At this time he asked for and extension of 6 weeks for additional1K. So the total due is up to 16K. He pays 2500 at the end of 6 weeks. Then another 2000 six weeks later. The balance is down to 12500. This a personal cash loan with no collateral. Over T-day I told my brother and he said I may be in violation of the state of GA usury laws. If so how do I come up with right interest rate? Thanks for you advice PCH

Georgia usury laws are ridiculously complex. In general, however, on a personal loan, the maximum interest rate is 7% simple interest per year, which equates to 0.5833% per month, not compounded. On $10,000 that would be $58.33 per month interest -- hardly worth the risk of making the loan without collateral.

A "penalty," whether characterized as such, or characterized as "interest," is unenforceable under the common law of contracts. Moreover, Georgia makes a charge in excess of 5% per month on a personal loan, a misdemeanor, which means, for $10,000, more than $500 per month in interest could get you a jail sentence.

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thanks for the information. so next week he need only pay the difference from 4500 to 13000? that would be 500 for six months. this would make him happy