North Carolina Interest Rate Laws


Section 24-1 of Chapter 24 under General Statutes of North Carolina regulates the rate of interest in the state of North Carolina.  The legal rate of interest in the state is eight percent (8%) per annum.  Pursuant to Section 24-1.1, parties can agree upon in writing any rate where the principal amount is more than twenty-five thousand dollars ($ 25,000).  If the, principal amount is twenty-five thousand dollars ($ 25,000) or less, the rate is the one published by the Commissioner of Banks on the fifteenth day of each month.  However, in this case also the rate should not exceed sixteen percent (16%).

A person who knowingly charges or receives a usurious interest will be subject to forfeiture of the entire interest.  A party who has already paid can recover twice the amount of interest paid and also forfeit the entire interest.  These penalties are provided in Section 24-2.

The rate of interest on a judgment based on contract action will be the same as the contract rate.  The rate on other judgments, which are not based on contract action, is eight percent (8%) per annum, which is the legal rate in the state.  The rate of interest on judgment is provided in Section 24-5.

Pursuant to Section 24-1.1A, parties can agree in writing a higher rate on home loans secured by first mortgages or first deeds of trust.  By the authority of Section 24-1.4, interest rates for savings and loan associations can also exceed the legal rate of the state.  Section 24-1.2A authorizes equity lines of credit also to have a higher rate of interest agreed upon.

Section 24-9 classifies certain loans as ‘exempt loans’ in which a higher rate of interest can be agreed upon by a lender and a borrower.  ‘Exempt loan’ is a loan in which:

  1. The loan amount is three hundred thousand dollars ($ 300,000) or more; or
  2. The borrower is a person other than a natural person; or
  3. The loan is obtained by a natural person primarily for a purpose other than a personal, family, or household purpose.

‘Exempt loans’ are not subject to the state usury penalty.

N.C. Gen. Stat. § 24-1

Legal rate is eight percent
The legal rate of interest shall be eight percent (8%) per annum for such time as interest may accrue, and no more.

N.C. Gen. Stat. § 24-1.1

Contract rates and fees
(a) Except as otherwise provided in this Chapter or other applicable law, the parties to a loan, purchase money loan, advance, commitment for a loan or forbearance other than a credit card, open-end, or similar loan may contract in writing for the payment of interest not in excess of:
(1) Where the principal amount is twenty-five thousand dollars ($ 25,000) or less, the rate set under subsection (c) of this section; or
(2) Any rate agreed upon by the parties where the principal amount is more than twenty-five thousand dollars ($ 25,000).
(b) As used in this section, interest shall not be deemed in excess of the rates provided where interest is computed monthly on the outstanding principal balance and is collected not more than 31 days in advance of its due date. Nothing in this section shall be construed to authorize the charging of interest on committed funds prior to the disbursement of said funds.
(c) On the fifteenth day of each month, the Commissioner of Banks shall announce and publish the maximum rate of interest permitted by subdivision (1) of subsection (a) of this section on that date. Such rate shall be the latest published noncompetitive rate for U.S. Treasury bills with a six-month maturity as of the fifteenth day of the month plus six percent (6%), rounded upward or downward, as the case may be, to the nearest one-half of one percent ( 1/2 of 1%) or sixteen percent (16%), whichever is greater. If there is no nearest one-half of one percent ( 1/2 of 1%), the Commissioner shall round downward to the lower one-half of one percent ( 1/2 of 1%). The rate so announced shall be the maximum rate permitted for the term of loans made under this section during the following calendar month when the parties to such loans have agreed that the rate of interest to be charged by the lender and paid by the borrower shall not vary or be adjusted during the term of the loan. The parties to a loan made under this section may agree to a rate of interest which shall vary or be adjusted during the term of the loan in which case the maximum rate of interest permitted on such loans during a month during the term of the loan shall be the greater of the rate announced by the Commissioner in (i) the preceding calendar month or (ii) the calendar month preceding that in which the rate is varied or adjusted.

N.C. Gen. Stat. § 24-2

Penalty for usury; corporate bonds may be sold below par
The taking, receiving, reserving or charging a greater rate of interest than permitted by this chapter or other applicable law, either before or after the interest may accrue, when knowingly done, shall be a forfeiture of the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon. And in case a greater rate of interest has been paid, the person or his legal representatives or corporation by whom it has been paid, may recover back twice the amount of interest paid in an action in the nature of action for debt. In any action brought in any court of competent jurisdiction to recover upon any such note or other evidence of debt, it is lawful for the party against whom the action is brought to plead as a counterclaim the penalty above provided for, to wit, twice the amount of interest paid as aforesaid, and also the forfeiture of the entire interest. If security has been given for an usurious loan and the debtor or other person having an interest in the security seeks relief against the enforcement of the security or seeks any other affirmative relief, the debtor or other person having an interest in the security shall not be required to pay or to offer to pay the principal plus legal interest as a condition to obtaining the relief sought but shall be entitled to the advantages provided in this section. Nothing contained in this section or in G.S. 24-1, however, shall be held or construed to prohibit private corporations from paying a commission on or for the sale of their coupon bonds, nor from selling such bonds for less than the par value thereof.

N.C. Gen. Stat. § 24-5

Interest on judgments
(a) Actions on Contracts. – In an action for breach of contract, except an action on a penal bond, the amount awarded on the contract bears interest from the date of breach. The fact finder in an action for breach of contract shall distinguish the principal from the interest in the award, and the judgment shall provide that the principal amount bears interest until the judgment is satisfied. If the parties have agreed in the contract that the contract rate shall apply after judgment, then interest on an award in a contract action shall be at the contract rate after judgment; otherwise it shall be at the legal rate.

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(b) Other Actions. – In an action other than contract, any portion of a money judgment designated by the fact finder as compensatory damages bears interest from the date the action is commenced until the judgment is satisfied. Any other portion of a money judgment in an action other than contract, except the costs, bears interest from the date of entry of judgment under G.S. 1A-1, Rule 58, until the judgment is satisfied. Interest on an award in an action other than contract shall be at the legal rate.

N.C. Gen. Stat. § 24-1.1A

Contract rates on home loans secured by first mortgages or first deeds of trust
(a) Notwithstanding any other provision of this Chapter, but subject to the provisions of G.S. 24-1.1E, parties to a home loan may contract in writing as follows:
(1) Where the principal amount is ten thousand dollars ($ 10,000) or more the parties may contract for the payment of interest as agreed upon by the parties;
(2) Where the principal amount is less than ten thousand dollars ($ 10,000) the parties may contract for the payment of interest as agreed upon by the parties, if the lender is either (i) approved as a mortgagee by the Secretary of Housing and Urban Development, the Federal Housing Administration, the Department of Veterans Affairs, a national mortgage association or any federal agency; or (ii) a local or foreign bank, savings and loan association or service corporation wholly owned by one or more savings and loan associations and permitted by law to make home loans, credit union or insurance company; or (iii) a State or federal agency;
(3) Where the principal amount is less than ten thousand dollars ($ 10,000) and the lender is not a lender described in the preceding subdivision (2) the parties may contract for the payment of interest not in excess of sixteen percent (16%) per annum.

N.C. Gen. Stat. § 24-1.4

Interest rates for savings and loan associations
(a) Notwithstanding any other provision of law, a savings and loan association domiciled in North Carolina may charge interest or collect fees with respect to any loan to the same extent as if the provisions of section 501 of Public Laws 96-221, as interpreted by the Federal Home Loan Bank Board prior to the effective date of this section, were still in effect in North Carolina.
(b) Notwithstanding any other provision of law, any savings and loan association in North Carolina may contract for interest on any loan, purchase money loan, advance, commitment for a loan or forbearance at any rate permitted by federal law to a savings and loan association the accounts of which are insured by the Federal Savings and Loan Insurance Corporation.

N.C. Gen. Stat. § 24-9

Loans exempt from rate and fee limitations

(a) As used in this section, the following definitions apply:
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(3) “Exempt loan” means a loan in which:
a. The loan amount is three hundred thousand dollars ($ 300,000) or more; or
b. The borrower is a person other than a natural person; or
c. The loan is obtained by a natural person primarily for a purpose other than a personal, family, or household purpose. Whether a loan is obtained primarily for a purpose other than a personal, family, or household purpose shall be guided by the standards established by the federal Truth In Lending Act (Title 1 of Public Law 90-321; 82 Stat. 146; 15 U.S.C. § 160, et seq.) and all regulations and rulings issued pursuant to that Act, as the same may be amended from time to time.
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(b) Notwithstanding any other provision of this Chapter or any other provision of State law, any borrower in an exempt loan transaction may agree to pay, and any lender, including a bank, may charge and collect from the borrower, interest at any rate and fees and other charges in any amount that the borrower agrees to pay. A claim or defense of usury is prohibited in an exempt loan transaction.

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N.C. Gen. Stat. § 24-1.2A

Equity lines of credit
(a) Notwithstanding any other provision of this Chapter, the parties to an equity line of credit, as defined in G.S. 45-81, may contract in writing for interest at rates which shall not exceed the maximum rates permitted under G.S. 24-1.1(c); provided, however, that the parties may contract for interest rates which shall be adjustable or variable, so long as for adjustable or variable rate contracts the rate in effect for a given period does not exceed the maximum rate permitted under G.S. 24-1.1(c) for the same period.
(b) Fees may be charged on equity lines of credit which in the aggregate, over the life of the contract based on the maximum limit of the line of credit, do not exceed those permitted under G.S. 24-10. Any lender may charge a party to a loan or extension of credit governed by this section a fee for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit, such fee not to exceed the greater of one-quarter of one percent ( 1/4 of 1%) of the balance outstanding at the time of the modification, renewal, extension, or amendment of terms, or fifty dollars ($ 50.00).