- Unless specified in writing, all used-car loans in Georgia are for 7 percent interest.Jupiterimages/liquidlibrary/Getty Images
Like most states, Georgia has determined that lenders can charge no more than a specified interest rate for certain types of loans. Georgia does not separate out loans for used cars from other loans. Instead, Georgia classifies the interests rates according to the overall amount of the loan. As a practical matter, you might pay more or less than Georgia laws allow because national banks, which often finance car loans, are not subject to state's interest rate laws. However, under federal law, national banks can charge up to the amount of interest allowed by the state's interest-rate laws. - The maximum rate allowable for loans under $3,000, including car loans, in Georgia is 16 percent per year. Anything over that is considered usury. Usury is the legal term for charging an excessive rate of interest.
- The maximum allowable interest in Georgia for loans between $3,000 and $250,000 is 5 percent per month, which equates to 60 per year assuming simple interest. So-called payday lenders and title-loan businesses prey on desperate borrowers at this legally allowable rate for short-term loans.
- Banks chartered under the Federal Government are subject to federal interest rate restrictions, not Georgia restrictions. Currently, these banks are not allowed to charge interest greater than 1 percent of the discount rate available on 90 day commercial paper in effect at the Federal Reserve Bank in the lender's home Federal Reserve District (less than 1 percent as of late 2010), or greater than the maximum interest rate in the state where the bank is headquartered. The discount-rate provision only has meaning in high-interest rate economic environments, such as the early 1980s. The maximum rate allowed by law in Georgia (16 percent) comes into play currently for used-car loans received by many borrowers with questionable credit histories.
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