What is the maximum interest rate I can be charged under Texas law? 

Patrons frequently ask us what the maximum interest rate in the state of Texas is. Unfortunately, this is not a question with a straightforward answer. Below are a few of the common scenarios that patrons ask about.

Generally

There a few sections of law that set forth maximum interest rates. Article 16, Section 11 of the Texas Constitution states that in the absence of other legislation, contracts involving a rate of interest higher than 10% “shall be deemed usurious”. This section also states that “in contracts where no rate of interest is agreed upon, the rate shall not exceed” 6%. 

Several chapters of the Texas Finance Code address interest rates:

• Chapter 302 discusses interest rates in general and reiterates the rates specified in the Texas Constitution. 
• Chapter 303 discusses optional rate ceilings and caps it at 18% in section 303.009. 
• Chapter 342 discusses consumer loans and interest charges beginning in subchapter E.
• Chapter 345 discusses retail installment sales and permissible time price differentials.
• Chapter 346 discusses revolving credit accounts such as credit cards. Section 346.101 places a maximum interest rate of 18%. Please note that certain interstate banks may “export” the highest interest rate allowable in their home state. 

Motor Vehicle Sales

Section 348.103 of the Texas Finance Code allows for a “time price differential” on motor vehicle installment sales that are paid in equal monthly installments and places restrictions on the amount of that differential. 

The Office of the Consumer Credit Commissioner's page on current motor vehicle rates chart explains how this law is implemented. You can use the charts on this page to determine the maximum allowable rate. 

Payday and Title Loans

The Texas Fair Lending Alliance has this explanation on their frequently asked questions page: 

Question: How are Annual Percentage Rates (APRs) of 500% or more legal?

Usury protections in the Texas Constitution prohibit lenders from charging more than 10% interest unless the Texas Legislature specifically authorizes a higher rate. Payday and auto title businesses have found a way around the constitutional protections by exploiting a legal loophole. Payday and auto title storefronts register as Credit Access Businesses (CABs) under the Credit Services Organization (CSO) Act, broker loans between the borrower and a third party lender, and charge borrowers high fees for arranging and guaranteeing these loans. The third party lender charges interest at or below 10% to avoid licensing under Texas law. CAB fees are completely unregulated and result in APRs over 500%.

For more information on payday loans, please visit our research guide on payday loans.

The Office of the Consumer Credit Commissioner (OCCC) regulates several specific categories of lenders, such as pawnshops and property tax lenders. The OCCC provides interest rate information for these industries on their website.