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Legal rate of interest vs. General usury limit

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H

hybrid24

Junior Member
What is the name of your state? IL

I loaned a friend $4000.00 at an interest rate of 7.5% annually. I was trying to find out the maximum interest rate permitted by Illinois law and found this statement:

ILLINOIS, the legal rate of interest is 5%. The general usury limit
is 9%. The judgment rate is 9%.

Does this mean that the rate on the note is illegal and makes the whole note unenforceable? Or does this mean that the legal upper limit is 5%-9%? On the note, next to the statement of 7.5% annually as the rate, I wrote in parenthesis "or maximum rate permitted by law, whichever is lower." Will this maintain the enforceability of the note? The note also has a severability clause.

Thanks for any help you can provide. I thought I did adequate research before I drew up the note and found the maximum rate to be %11, but now I have no idea where I got that number.What is the name of your state?
 


S

seniorjudge

Senior Member
hybrid24 said:
What is the name of your state? IL

I loaned a friend $4000.00 at an interest rate of 7.5% annually. I was trying to find out the maximum interest rate permitted by Illinois law and found this statement:

ILLINOIS, the legal rate of interest is 5%. The general usury limit
is 9%. The judgment rate is 9%.

Does this mean that the rate on the note is illegal and makes the whole note unenforceable? Or does this mean that the legal upper limit is 5%-9%? On the note, next to the statement of 7.5% annually as the rate, I wrote in parenthesis "or maximum rate permitted by law, whichever is lower." Will this maintain the enforceability of the note? The note also has a severability clause.

Thanks for any help you can provide. I thought I did adequate research before I drew up the note and found the maximum rate to be %11, but now I have no idea where I got that number.What is the name of your state?
Click to expand...

Q: Does this mean that the rate on the note is illegal and makes the whole note unenforceable?

A: No; the legal rate of interest generally means the interest rate allowed on (for example) money judgments.


Q: Or does this mean that the legal upper limit is 5%-9%? On the note, next to the statement of 7.5% annually as the rate, I wrote in parenthesis "or maximum rate permitted by law, whichever is lower." Will this maintain the enforceability of the note? The note also has a severability clause.

A: Good thinking; I think you have an enforceable note on the terms you used.
 
J

JETX

Senior Member
seniorjudge said:
No; the legal rate of interest generally means the interest rate allowed on (for example) money judgments.
Click to expand...
And if that were correct (it isn't), what about the other part of the OP: "The judgment rate is 9%"? Does that make the stated 9% judgment interest an ILLEGAL 'rate of interest'??
 
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