Can a licensed lender in Michigan charge triple-digit interest on a personal installment loan, the kind repaid in fixed monthly payments? Under state law, no. Licensed consumer lenders are capped at 25% a year, plus one limited processing fee.

This matters if you are weighing a small loan to cover a gap before closing, or if one already shows up on the bank statements your lender wants. The figures below come from Michigan statutes and state bulletins dated through January 2026.

Two statutes set the price

The Regulatory Loan Act, Act 21 of 1939 (MCL 493.1 to 493.26), requires anyone making loans to individuals for personal, family or household use to hold a state license. The Department of Insurance and Financial Services (DIFS), through its Office of Consumer Finance, issues those licenses and supervises the lenders. A licensee must keep a net worth of at least $100,000, post a surety bond and be examined at least once every five years.

The Act itself prints no interest rate. It points to the Credit Reform Act, and MCL 445.1854 sets that rate at 25% per annum. Interest must be charged on the unpaid balance for the days that actually pass. It cannot be precomputed, collected in advance or compounded, so paying early genuinely lowers what you owe.

On top of interest, MCL 493.13 allows a processing fee of up to 5% of the principal. The fee cap starts from a $250 base that is adjusted for inflation every two years. DIFS Bulletin 2024-05-CF held that cap at $400 for January 1, 2024 through December 31, 2025. The DIFS 2026 bulletin list includes a newer fee update, but the 2026 figure is not in the sources we reviewed. Check that bulletin before you sign.

Licensees also cannot secure the loan with a lien on your home (except after a court judgment), take an assignment of your wages or have you sign a confession of judgment.

Michigan's figures in one table

Rule Michigan (Regulatory Loan Act licensees)
Interest cap 25% per annum (MCL 445.1854)
Processing fee Up to 5% of principal; cap $400 for 2024 through 2025 (DIFS Bulletin 2024-05-CF)
Loan amount and term limits None stated in the statutes reviewed
Stacking loans No more than one unsecured contract with a licensee at a time (MCL 493.13(2))
Regulator DIFS, Office of Consumer Finance

Our sources do not say whether online lenders use bank partnerships or tribal status to lend above 25% in Michigan. They also do not cover credit union alternatives or state assistance programs. Here is what the law does say. An unauthorized lender charging more than 25% simple interest commits criminal usury, punishable by up to five years in prison or a $10,000 fine. A lender that overcharges also forfeits its interest and fees. So treat any offer above 25% from a lender you cannot find on the DIFS license list as a warning sign.

Not the same as a payday loan

Payday loans fall under a separate law, the Deferred Presentment Service Transactions Act, and require a separate DIFS license. The rules for payday loans in Michigan are their own. Banks and credit unions fall outside the Regulatory Loan Act entirely.

How an underwriter reads this loan

An underwriter sees the loan as a deposit and then as a repeating debit on your bank statements. Expect a request for a letter of explanation that names the lender, the balance and the monthly payment. That payment counts in your debt-to-income ratio, the share of your monthly income already committed to debts.

Paying the loan off before you apply removes the payment from that ratio. The payoff money, however, comes out of the cash the underwriter is also counting toward your closing. Taking out a new loan after you apply is the riskier move. How each lender treats these situations varies, so ask your loan officer before you borrow or pay off anything.