What Is the Maximum Legal Interest Rate in Minnesota?

If you're writing a private loan in Minnesota, the interest rate isn't entirely up to you. The state sets limits, and crossing them carries a real penalty. The rule you need to know is Minnesota's usury law, which caps how much interest a lender can charge for the loan or forbearance of money. Charge above the cap and you can lose the right to collect any interest at all.

The rules live in Minnesota Statutes chapter 334. Here's the general legal rate, what you can agree to in writing, the consumer-loan picture, and what happens if you go over.

The general legal rate: 6 percent

Minnesota's default interest rate is set by Minnesota Statutes 334.01. It provides that interest on any legal indebtedness is 6 percent per year unless a different rate is contracted for in writing.

That 6 percent does two jobs. It's the rate that applies when a debt carries interest but the parties never wrote down a number, and it's the baseline figure courts use, for example, in some judgment contexts. If your note simply says nothing about a rate, this is the gap-filler.

What you can agree to in writing: the 8 percent cap

You can charge more than 6 percent, but only if it's in writing and only up to the usury ceiling. Under Minnesota Statutes 334.01, no one may take or receive a greater rate than 8 percent per year for the loan or forbearance of money on a written contract. For an ordinary private promissory note, 8 percent is the line.

There's an important exception. Loans of $100,000 or more are exempt from the chapter 334 interest-rate limits. In other words, the 8 percent cap is aimed at smaller private loans; large transactions fall outside it. If your loan is under that threshold and isn't covered by a separate special rule, treat 8 percent as your maximum.

Because the cap depends on the loan size and the type of transaction, confirm your specific situation rather than assuming. The usury limit checker is the quickest way to see what applies to your loan.

Business and consumer loans have their own rules

The flat 8 percent figure isn't the whole story. Minnesota carves out categories with different ceilings, and the right number depends on who the borrower is and what the loan is for.

For certain business and agricultural loans under $100,000, Minnesota Statutes 334.011 allows a higher, index-based rate rather than the flat 8 percent, tied to a federal commercial-paper benchmark plus a margin. The point is that a business loan and a personal loan can carry different legal maximums.

Consumer lending is governed by additional statutes beyond chapter 334, including Minnesota's regulated-loan and consumer-credit provisions, which set their own rate structures for licensed lenders. If you're a private individual lending to a friend or family member, the chapter 334 framework is usually your reference point, but anyone in the business of consumer lending should look at those separate statutes too.

The practical lesson is that there's no single "Minnesota interest rate" that fits every loan. The right ceiling turns on the dollar amount, the borrower, and the purpose of the loan. A $5,000 personal loan between friends, a $60,000 business loan, and a licensed consumer-finance loan each sit under different rules. Identify which bucket your loan falls into before you pick a number, because applying the wrong ceiling is how lenders accidentally cross into usury.

What counts as interest for the cap

One trap catches private lenders who think they're under the cap when they're not. Usury looks at the substance of what you're charging, not just the line labeled "interest." Fees, points, and other charges dressed up under different names can be folded into the interest calculation if they're really a cost of borrowing.

So a note that states 8 percent interest but also tacks on a large up-front "processing fee" can push the effective rate over the line even though the stated rate looks compliant. If you're charging anything beyond straightforward interest, account for it when you check yourself against the cap. The safest approach on a private loan is to keep the structure simple: a clear principal, a clear rate, and few or no extra charges that a court could recharacterize as disguised interest.

The penalty for charging over the cap

Minnesota takes usury seriously, and the penalty is steep. When a loan is usurious under chapter 334, the lender can forfeit the entire interest on the debt. You don't just get knocked back down to the legal rate; you can lose all of the interest, which is a far harsher result than simply having the excess shaved off.

In some situations a borrower who has already paid usurious interest may be able to recover amounts overpaid. The exact remedy depends on the facts and the specific loan type, but the headline is clear: an overcharge can turn an interest-bearing note into a zero-interest one, and the borrower, not the lender, holds the upper hand once usury is in play. That's a powerful reason to stay inside the cap from the start rather than hoping a high rate goes unchallenged.

How to set a compliant rate on your note

Keeping your note clean is mostly about confirming a few things before you sign.

Put the rate in writing. The 6 percent default applies only when nothing is agreed, so if you want anything other than 6, state it clearly in the note. Confirm your loan size and type, because the $100,000 threshold and the business-versus-consumer distinction change which ceiling applies. And if your number is anywhere near the top of the range, check it against the statute or the lookup tool before you commit.

When you're ready to draft, you can start from a state-aware form at our Minnesota promissory note page. Set a rate you've confirmed is inside the cap, write it clearly into the note, and you've removed the single biggest risk to a private loan's enforceability in Minnesota.

Sources

• Minnesota Statutes 334.01
• Minnesota Statutes 334.011