Dear Driving for Dollars,
I have bad credit, and I need to buy a new car. What is the highest interest rate I can be charged on a car loan?
— Jonni
Dear Jonni,
The maximum interest rate for a car loan varies by state. Typically, these are referred to as “usury rates.” The word usury refers to the practice of lending money at an exorbitant interest rate.
Usury rates usually vary depending on the type of loan. For example, the usury rate for a car loan would most likely be different than the usury rate for a credit card loan in the same state. To find the usury rate, visit the legislative information section of the applicable state website. I saw rates ranging from 12 percent to 22 percent, though your state’s usury rate may be different.
It’s illegal to charge an interest rate higher than the state usury law allows. Your recourse is to contact your state attorney general, but keep in mind usury rates are associated with the lender’s location (which may not be the same as your state). So a lender may be able to legally charge an interest rate higher than your state allows if the state where it is headquartered has a higher usury rate.
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