Most people never think about interest rate laws until they’re sitting across from a lender. Then the numbers hit. And suddenly, you’re wondering if what you’re being charged is even legal.
Here’s the thing. Indiana’s usury laws are complicated. There’s no single cap that covers every loan. The rules depend on the type of loan, who’s lending, and how much you’re borrowing. Let’s break it all down so you actually understand what’s going on.
What Is Usury?
Usury means charging too much interest on a loan. It’s basically legal loan sharking. States make laws to stop lenders from going too far.
Indiana has a set of rules that limit how much interest a lender can charge. But those rules look very different depending on the loan type. That part surprises a lot of people.
Indiana’s Basic Interest Rate Rules
Okay, this is important. Pay attention here.
Indiana doesn’t have one universal usury cap. Instead, the state uses a system based on loan categories. Each category has its own rate limit. Knowing which category your loan falls into can save you a lot of money.
The Legal Rate of Interest
When no interest rate is written into a contract, Indiana defaults to a legal interest rate of 10% per year. Think of this as the baseline. It’s the rate courts use in judgment cases too.
So if you lend money to a friend with no written agreement on interest, Indiana law assumes a 10% annual rate applies by default.
Consumer Loans: The 25% Cap
For regular consumer loans, Indiana sets the cap at 25% per year. This covers most personal loans from licensed lenders. The limit applies to the unpaid balance of the loan principal.
This rule comes from Indiana Code Section 24-4.5-3-201. It was updated to reflect 25% after earlier versions used a 21% limit. The rate must be calculated using what’s called the actuarial method, which basically means interest is calculated on what you still owe, not the original amount.
Pretty straightforward, right?
Supervised Loans: Higher Rates Allowed
Now here’s where it gets more complex.
A “supervised loan” is any consumer loan where the finance charge exceeds 25% per year. These are higher-risk loans made by specially licensed lenders. Think of them like a step above a regular personal loan but below a payday loan.
Indiana Code Section 24-4.5-3-501 defines supervised loans. Only licensed “supervised lenders” can offer them. These lenders go through state approval. They can legally charge more than 25%, but they’re still bound by specific rules under Indiana Code Section 24-4.5-3-508.
Confused about whether your loan is supervised? Ask your lender directly. They’re required to tell you.
The 72% Criminal Line
Hold on. This one is critical.
Indiana’s criminal loansharking law draws a hard line at 72% APR. Go above that, and you’re not just breaking a civil rule. You’re committing a felony.
This limit comes from Indiana’s criminal code. The Indiana Department of Financial Institutions has confirmed it applies even when extra fees and charges are added to a loan. If the total annual percentage rate crosses 72%, the lender faces serious criminal charges.
No legitimate lender should be charging you more than 72% APR on any loan in Indiana. If someone is, that’s a crime.
Judgment Interest Rates
Say someone sues you over a debt and wins. What interest rate applies to what you owe?
In Indiana, judgment interest is capped at 8% per year. That number comes from Indiana Code Sections 24-4.6-1-101 and 24-4.6-1-102. It applies whether or not there was a contract. It’s also the rate used when government agencies are involved in legal action.
Less severe than other loan rates, but still no joke if a judgment sits unpaid for years.
Payday Loans: A Different Animal
Okay, pause. Read this carefully.
Payday loans in Indiana play by completely different rules. And honestly, this is the part most people get wrong.
Indiana allows payday loans under Indiana Code Section 24-4.5-7-101 and following sections. These small, short-term loans are technically regulated, but the effective interest rates are staggering.
Here’s how payday loan fee caps work in Indiana. Finance charges are set as a percentage of what you borrow, not an annual rate. For the first $250 of a loan, lenders can charge up to 15%. For amounts between $251 and $400, the charge drops to 13%. For amounts between $401 and $550, the maximum charge is 10%.
Sounds reasonable on paper. But do the math. A $100 payday loan with a 15% fee costs $15. With a standard two-week repayment term, that translates to roughly 391% APR. Some lenders go even higher.
That’s not a typo. Three hundred and ninety-one percent.
Payday Loan Limits in Indiana
Indiana does put some guardrails on payday loans. The maximum loan amount is $605 or 20% of your gross monthly income, whichever is less. You can only have two payday loans open at one time, and they must come from different lenders. Rollovers are officially discouraged, though some extensions are allowed.
The minimum loan term is 14 days. There’s no defined maximum term.
One important protection: lenders cannot charge more than one non-sufficient funds (NSF) fee of $25 if a payment bounces. Origination fees and collection charges are not allowed.
Military Borrowers Get Extra Protection
This one’s worth knowing. The federal Military Lending Act caps interest rates at 36% APR for active-duty military members and their dependents. This is a federal law. It overrides Indiana state law.
So if you’re active military, no lender in Indiana can charge you more than 36% APR on a payday loan, period.
What Happens If a Lender Charges Too Much?
So what happens if you break these rules? Let’s talk about penalties.
Under Indiana Code Section 24-4.5-5-301, any person who charges usurious interest commits a Class A misdemeanor. That can mean up to a year in jail and fines up to $5,000.
But it gets better for borrowers. Under Indiana Code Section 24-4.5-5-202, if a lender charges you illegal interest, you have the right to recover what you overpaid. The court can also award you a penalty up to three times the amount of the loan finance charge. That’s a powerful consumer protection tool.
Think of it like this: the law doesn’t just stop the lender. It can actually make the lender pay you.
And remember the loansharking threshold. If a lender’s APR exceeds 72%, that crosses into felony territory under Indiana’s criminal code. That’s not a slap on the wrist. That’s a serious criminal charge.
Exceptions and Special Situations
You’re not alone if you’re wondering about exceptions. Here are a few important ones.
National banks and credit card companies often follow their home state’s laws, not Indiana’s. This is thanks to a 1978 U.S. Supreme Court decision and the federal Monetary Control Act of 1980. So your Visa or Mastercard from a Delaware-based bank may charge rates that don’t match Indiana’s limits.
Business loans also often get different treatment. Many states, including Indiana, give more flexibility on business lending. If you’re a business owner borrowing large amounts, the standard consumer loan caps may not apply.
Mortgage loans follow their own rules too. Home loans are governed by a mix of state and federal regulations, and the specific terms depend on whether the loan is conventional, FHA, VA, or another type.
Personally, I think these exceptions create a lot of confusion for everyday borrowers. Most people assume Indiana’s rules cover everything. They don’t.
Recent Changes: What’s New in 2025 and 2026
Wait, it gets more interesting.
Indiana lawmakers considered House Bill 1174 in 2025. This bill proposed changes to supervised loan rules, including allowing monthly service fees on certain small supervised loans under $5,000. It also required lenders to report borrower payments to credit bureaus. The bill was set to take effect July 1, 2025 if passed.
Around the same time, legislators debated expanding the reach of supervised loans up to $25,000, which would allow higher interest rates and service fees on larger loan amounts. Consumer advocates pushed back, arguing this would hurt low-income Hoosiers.
The debate around capping payday loans at 36% APR has also continued for years. Bills proposing this cap have been introduced multiple times but have not yet passed.
Stay current. Indiana’s lending laws are actively changing.
How to Protect Yourself
Here’s what you need to do if you’re taking out any loan in Indiana.
First, always ask for the APR in writing before signing anything. The federal Truth in Lending Act requires lenders to disclose this. APR includes fees and interest combined. It gives you the real cost of the loan.
Second, verify your lender’s license. You can check whether a lender is properly licensed through the Indiana Department of Financial Institutions at in.gov/dfi. Unlicensed lenders don’t have to follow Indiana’s consumer protection rules.
Third, if you think a lender has overcharged you, file a complaint. You can do this directly through the Indiana Department of Financial Institutions at in.gov/dfi. If a lender is charging over 72% APR, you may also want to contact an attorney.
Trust me, taking these steps upfront can save you thousands.
How to Report a Usury Violation
Wondering how to report a bad lender? Here’s the process.
You can file a complaint online through the Indiana Department of Financial Institutions. Go to in.gov/dfi and look for the consumer complaint section. You’ll need basic information about the loan, the lender’s name, and the interest rate or fees you were charged.
If the lender is not licensed in Indiana, you can also contact the Indiana Attorney General’s Consumer Protection Division at indianaconsumer.com.
For criminal violations like loansharking above 72% APR, you can contact your local prosecutor’s office or the Indiana State Police.
Frequently Asked Questions
What is the maximum interest rate a lender can charge in Indiana? It depends on the loan type. Regular consumer loans cap out at 25% APR. Supervised loans can go higher but cannot legally exceed 72% APR without becoming a criminal offense.
Is there a usury law in Indiana? Yes. Indiana’s usury rules are spread across Title 24 of the Indiana Code. Charging illegal interest rates is a Class A misdemeanor, and charging above 72% APR is a felony.
What happens if I was charged an illegal interest rate? You have the right to recover the excess amount paid. A court can also award you a penalty up to three times the finance charge. Talk to a consumer protection attorney.
Are payday loans legal in Indiana? Yes, payday loans are legal in Indiana but are heavily criticized for their high effective APRs. They are regulated under Indiana Code Section 24-4.5-7-101, but effective APRs can reach 391% or higher.
Do federal laws override Indiana’s usury limits? In some cases, yes. National banks can charge rates allowed in their home state. Active-duty military members are protected by the federal Military Lending Act, which caps rates at 36% APR.
Final Thoughts
Now you know the basics of Indiana’s usury laws. They’re layered, they’re complex, and they have real consequences for both borrowers and lenders.
The main things to remember: regular consumer loans cap at 25%, criminal loansharking starts at 72% APR, and payday loans exist in a different world entirely. Always know your loan type. Always check your lender’s license. And never sign something without knowing the full APR.
Stay informed. And when in doubt, call a consumer protection attorney before things get complicated.
References
- Indiana Code § 24-4.5-3-201 – Loan Finance Charge for Consumer Loans: law.justia.com/codes/indiana/title-24/article-4-5/chapter-3/section-24-4-5-3-201
- Indiana Code § 24-4.5-3-501 – Supervised Loan Definitions: law.justia.com/codes/indiana/title-24/article-4-5/chapter-3/section-24-4-5-3-501
- Indiana Department of Financial Institutions – Advisory on Loansharking Statute: in.gov/dfi
- Indiana Code § 24-4.5-7-101 – Small Loans (Payday Loans): iga.in.gov
- Indiana Code § 24-4.6-1-101 – Maximum Interest Rate and Judgment Rate: loansandlending.uslegal.com/interest/indiana-interest-rate-laws
- Indiana House Bill 1174 (2025) – Supervised Loan Changes: legiscan.com/IN/text/HB1174
- DebtHammer – Indiana Payday Loan Laws Guide: debthammer.org/indiana-payday-loan-laws
