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Are Your Payday Loans Enforceable Against You?

June 19, 2013

There’s an old concept, known as “usury,” that remains alive and well in Texas law. Usury, the charging of exorbitant interest rates on a loan, is prohibited under state law. Still, the temptation of the unscrupulous to make a quick buck on the unfortunate is simply too much for a large and growing number of lenders who skirt Texas usury law, hoping that they won’t get caught.


What’s an appropriate amount of interest to charge a debtor? The short answer is that it depends on the debt. In general, the Texas Finance Code prohibits the lending of commercial loans, debts made primarily for the operation of a business, at an annual interest rate in excess of 28 percent. Likewise, the financing of the sale of a motor vehicle must remain within 27 percent interest. Other appropriate levels of interest depend on whether the debt is for residential or consumer purposes, but the point remains: there really is too much of a good thing for creditors.


By way of comparison, most debt from major lenders today is offered at around 5 or 6 percent, so there’s still plenty of money for a creditor who lends at a 20 or 25 percent interest rate.


So just how much do some unscrupulous lenders charge for a loan? Incredible as it may sound, some online payday lenders charge an effective interest rate in excess of 500 percent. If this sounds painfully familiar to you, there may be good news: the excessive interest rate associated with this loan may make it unenforceable against you.


Want to find out if you’ve been the victim of a usurious loan – and if you really have to pay it? How may this impact your pending or possible bankruptcy? The attorneys at the law firm of Fears Nachawati may be able to help you answer these and many more important questions. To get started with your free consultation, contact us today.


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