Small Loan Interest Rates Just Went Up

NASHVILLE (March 24) — A new Tennessee law raises the maximum allowable interest rate on certain small-dollar loans to 36 percent, up from the previous 30 percent cap. The change affects industrial loan and thrift companies, which include many of the state’s payday and title lenders.

Locally, the law applies to payday loan companies already operating in Carroll, Weakley and Henry counties, including storefronts in Huntingdon, Martin and Paris.

The new cap applies to loans of $100 or more. Borrowers who carry a balance for a full year could pay up to 36 percent in interest—not including additional fees, which remain legal under Tennessee’s permissive lending rules.

Supporters say the increase helps lenders cover the risks of high-default loans and keeps credit options available. Opponents argue it raises costs for borrowers who already struggle to repay, many of whom use these loans for basic expenses like rent, utilities or groceries.

The law does not expand consumer protections, reporting requirements or financial disclosures. It simply increases the maximum effective annual interest rate allowed under state law.

The legislation—House Bill 775 and Senate Bill 694—passed the General Assembly in March. It now awaits action from Gov. Bill Lee. If he does not sign or veto it, the law will take effect automatically within 10 days of reaching his desk.