Tennessee Code Annotated
Tenn. Code Ann. § 45-5-401 (2026)
Contracts for interest - Computation
✓ current as of May 2026
- (a)
- (1) With respect to loans where the amount financed is less than one hundred dollars ($100), this chapter permits, but does not require, interest to be contracted for by way of discount. Interest may also be contracted for at an effective rate that results in the same amount being paid as if interest had been contracted by way of discount at a nominal rate not in excess of the maximum nominal rate specified in § 45-5-301(2) for loans of this category, always subject to the maximum effective rate provided in § 45-5-301(2) for loans of this category.
- (2) With respect to loans where the amount financed is one hundred dollars ($100) or more, this chapter does not limit or restrict the manner or method of contracting for interest, whether by way of add-on, discount, or otherwise, so long as the maximum effective rate of interest for loans of this category does not exceed that authorized by § 45-5-301(2) for the loans.
- (3) With respect to loans made under open-end credit plans, interest shall be computed on the principal balance unpaid from time to time, always subject to the maximum effective rate provided in § 45-5-301(2) for loans of this category.
- (b) In any event, the maximum effective rate of interest on a loan shall:
- (1) Be determined in accordance with the actuarial method;
- (2) In the case of precomputed interest, be calculated and determined as of the date of the loan on the assumption that all scheduled payments will be made as contracted; and
- (3) Not be affected by the prepayment of the loan, in whole or in part.
- (c) Interest may be contracted for on the unpaid balance due after the maturity date of the loan:
- (1) Where the amount financed is less than one hundred dollars ($100), at an effective rate not to exceed eighteen percent (18%) per annum;
- (2) Where the amount financed is one hundred dollars ($100) or more, up to five thousand dollars ($5,000), at an effective rate not to exceed thirty percent (30%) per annum;
- (3) Where the amount financed is more than five thousand dollars ($5,000), at an effective rate not to exceed twenty-four percent (24%) per annum; and
- (4) Where the loan is made under an open-end credit plan, at an effective rate not to exceed twenty-four percent (24%) per annum.
- (d) The term of a loan for the purposes of this section commences on the date the loan is made. Differences in the lengths of months are disregarded and, for any period less than a month, each day may be counted as one-thirtieth (1/30) of a month.
Amended by 2018 Tenn. Acts, ch. 600, Secs.s 4, s 5 eff. 3/23/2018.
Acts 1979, ch. 204, § 9; T.C.A., § 45-2009; Acts 1983, ch. 164, § 2.
Notes of Decisions
Cited in 4
cases, 1990–2000 · leading case: State v. Owens, 20 S.W.3d 634 (Tenn. 2000).
State v. Owens, 20 S.W.3d 634 (Tenn. 2000). “§ 45-5-401 (West 1999); Nev.Rev.Stat. § 200.”
Hathaway v. First Fam. Fin. Servs., Inc., 1 S.W.3d 634 (Tenn. 1999). “The maximum interest rates that registrants can charge for loans is set forth in Tenn.Code Ann. § 45-5-401 (1993 Repl.). The maximum rates under the Loan and Thrift Act are more than twice the earlier constitutional limit of ten percent.”
Brabson v. Valentine, 804 S.W.2d 451 (Tenn. Ct. App. 1990). “Two experts testified that the interest rate charged on the loan here in issue was within permissible statutory limits but on cross-examination were unable to fully justify such calculations, particularly as to the statute TCA 45-5-401, definition of the same. The Court is…”
Willie & Bobbie Lomax v. Headley Homes (Tenn. Ct. App. 1997). “§§ 45-4-601 to -610 (1993) (credit unions); T.C.A. §§ 45-5-401 to -405 (1993 & Supp. 1996) (industrial loan and thrift companies).”
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