Sometimes we all need a little help. At those times, we often take out a loan, especially for big purchases like a home or business. Whether a loan is to buy a car, a house, or just to pay the rent or other household expenses, we should be aware of our rights as credit consumers. Each state, including Iowa, has legal maximum interest rates, however, there are often exceptions or other factors that affect interest rates.
Also, it’s important to work on budgeting to avoid debt, especially unnecessary debts. If you’re having financial difficulty, you may also want to consider credit counseling to help create a budget that works for you. For more information, see the FindLaw Bankruptcy section.
The following chart outlines the basic interest rate laws in Iowa.
| Code Sections | Iowa Code Chapter 535 – Money and Interest |
| Legal Maximum Rate of Interest | Iowa law permits a maximum interest rate of 5%, unless another rate is agreed upon in writing. In that case, the interest can’t exceed the official usury rate as set by the Iowa Superintendent of Banking. This maximum for January 2015 was 4.25%, however when it started in 1978, the maximum rate was 10%, so it fluctuates greatly. |
| Penalty for Unlawful Interest Rate (Usury) | It’s unlawful to charge a higher rate of interest than permitted by these Iowa laws. If a person does charge above the allowed amount, the plaintiff can get a judgment to pay back only the principal debt without interest or costs. In addition, the violator forfeits 8% of the unpaid principal at time of judgment. |
| Interest Rates on Judgments | The interest rate on judgments is 10% unless a different rate was stated in the contract which the judgment was based on, that interest rate can’t exceed the max that was permitted at the time. |
| Exceptions to Usury Laws | The maximum interest rate doesn’t apply to loans for real property, business or agricultural loans, or loans of over $25,000. |
If you believe you’ve been charged a higher interest rate than legally permitted, you may want to consult an experienced consumer protection attorney in Iowa.
Note: State laws are revised regularly. Please contact a banking attorney or conduct your own legal research to verify these state financial laws.
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