Private lending offers investors high returns, but many wonder: Is it legal to charge 30% interest as a private lender? The short answer is it depends on your state’s usury laws and lending structure. This article explains when such rates are legal and when they’re not.
Who This Article Helps
This guide helps:
- Private lenders who want to understand interest rate limits before funding a deal.
- Real estate investors who borrow from private lenders and want fair terms.
- Homeowners considering private loans for renovations or property purchases.
What Determines Whether 30% Interest Is Legal?
Charging 30% interest may or may not be legal depending on:
- State usury laws — Each state caps how much interest you can charge on loans.
- Loan type — Business, consumer, and real estate loans follow different rules.
- Lender licensing — Licensed lenders often have higher allowable limits.
- Borrower’s profile — Institutional borrowers can legally accept higher rates than individual consumers.
For example, Maryland’s usury law caps most interest rates at 6% to 8%, but exceptions exist for business or hard money loans.
Understanding Usury Laws in Private Lending
Usury laws protect borrowers from excessive interest rates.
If you exceed legal limits, you risk:
- Loan invalidation.
- Fines or civil penalties.
- Legal disputes that damage your reputation.
When Can Private Lenders Charge Over 20%?
Certain situations allow higher-than-average interest rates legally:
- Hard money loans secured by real estate often exceed 20%.
- Short-term bridge loans for fix-and-flip projects may reach up to 30%.
- Business-purpose loans usually face fewer restrictions than personal loans.
Local Private Lenders structures deals within legal limits while still offering competitive investor returns.
How To Stay Compliant as a Private Lender
Follow these steps to protect yourself and your borrowers:
- Research your state’s usury laws before setting interest rates.
- Structure loans as business-purpose to allow higher rates legally.
- Use clear written agreements detailing terms, rates, and collateral.
- Work with licensed lending professionals to maintain compliance.
- Consult legal counsel before offering loans above 20%.
Learn more about loan documentation in our post on How to Qualify for a Private Real Estate Loan in the DMV.
Real-World Example: Legal vs. Illegal 30% Interest
Let’s say you lend $100,000 for a property flip in Virginia:
- If the loan is business-purpose and secured by real estate, 30% may be legal.
- If the loan is consumer-purpose, that same 30% rate could violate usury laws.
This is why working with an expert team like Local Private Lenders ensures compliance and reduces legal risk.
Risks of Charging 30% Interest Without Proper Licensing
Charging excessive interest without a license can lead to serious consequences:
- Loss of loan repayment rights.
- Court-ordered refunds of interest already collected.
- Permanent damage to your investor credibility.
Avoid these pitfalls by partnering with regulated, experienced private lending professionals.
Related Reading
For more on managing real estate risk and profit, see blogs by Brickfront Properties and Construction.
Why Choose Local Private Lenders
Local Private Lenders helps investors and borrowers structure legal, high-return private loans that comply with state laws.
We offer:
- Transparent terms with no hidden fees.
- Licensed experts familiar with Maryland, Virginia, and D.C. lending laws.
- Tailored financing solutions for fix-and-flip, bridge, and construction loans.
Final Answer: Is It Legal To Charge 30% Interest?
Charging 30% interest as a private lender can be legal if:
- The loan serves a business or investment purpose, and
- The state’s usury exemptions apply.
However, for consumer loans, 30% often violates usury laws. To stay compliant, consult lending attorneys or partner with Local Private Lenders for properly structured deals.