Personal Loans in New Jersey: What Licensed Lenders May Charge

How the New Jersey rate limit works

Two statutes set the ceiling. N.J.S.A. 17:11C-32 lets a licensed consumer lender make installment loans of up to $50,000 at "an annual percentage rate or rates agreed to by the licensee and the borrower." It sets no number of its own. The number comes from the criminal code: under N.J.S.A. 2C:21-19, a rate above 30% per annum on a loan to an individual is not a rate authorized or permitted by law.

The 30% limit does not apply to loans to corporations and limited liability companies, which may be charged up to 50%. If you borrow through a business entity, ask which limit the lender is relying on.

How interest must be charged

Section 17:11C-32 also controls how a licensed lender computes interest, which protects you on top of the rate limit.

• Simple interest only: interest is computed on the unpaid principal at 1/365 of the yearly rate per day. It may not be collected in advance or compounded.
• Payments go to interest first, then to principal, and unpaid interest is not added to the principal.
• Variable rates are limited: on a closed-end loan the rate must follow an index the lender does not control, and the statute limits how far it can rise above the starting rate: no more than 3% in any 12 months and no more than 6% over the term. You must get written notice first.
• No loan splitting: a lender may not get you to take several loans so it can charge more than the law allows.

Because interest runs only on the unpaid balance, paying extra cuts the interest you owe. The extra payment calculator shows how much.

How New Jersey compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, New Jersey's 30% sits above Pennsylvania at about 24% and New York at about 25%. Delaware has no rate cap at all. The rules that apply follow the lender's license and your state of residence, not where the lender is based. The state rules map shows every state side by side.

Who needs a license and who does not

No person may engage in business as a consumer lender or sales finance company in New Jersey without first obtaining a license from the Department of Banking and Insurance (N.J.S.A. 17:11C-3). The license states whether the holder may act as a consumer lender, a sales finance company or both.

• Banks and credit unions answer to their own charters and banking regulators instead, and a bank may charge the rates its home state allows.
• Online lenders that partner with a bank may make loans through that bank, which can put the loan outside the New Jersey limit. Ask who the lender of record is.
• Payday and title loans made to individuals fall under the same usury statute. Our sister site Lendmira covers them on its New Jersey lending laws page.

Check a lender and file a complaint

1. 1 Look up the license in the Department of Banking and Insurance Licensee Search at https://www.nj.gov/dobi/licenseesearch/licsearch.htm before you apply.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees.
3. 3 Complain to the department online or with its banking complaint form, or call its consumer hotline at 1-800-446-7467, weekdays from 8:30 am to 5:00 pm.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner. Our guide on how to verify a lender lists the warning signs.

Questions people ask