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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
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

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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Customer: replied 7 years ago.
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
Expert:  socrateaser replied 7 years ago.

Based on what you've described:


1. You loaned $10,000.00

2. Six weeks later the interest owed would be $80.77

3. You were paid $2,500. The balance is now $7,500.00 + $80.77 simple interest

4. Six weeks later the interest owed would be $60.58

5. You were paid $2,000. The balance is now $5,500.00 + $80.77 + $60.58 simple interest



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