Can a Tennessee lender charge whatever it likes on a small installment loan, meaning a personal loan you repay in fixed monthly payments? No. A company making these loans under state law must register with the Tennessee Department of Financial Institutions (TDFI). Since July 1, 2025, it can charge a maximum effective rate of 36 percent a year on loans of $100 or more, according to a legal summary of Senate Bill 694.

That cap is not the whole cost. Fees are allowed on top of it, and terms are measured in months. If you are closing on a house soon, the loan also lands in your mortgage file.

The law and the agency that enforce it

Most installment loans in Tennessee are made under the Industrial Loan and Thrift Companies Act, which is Title 45, Chapter 5 of the Tennessee Code. A smaller share are made under the Flexible Credit Act. TDFI's Compliance Division licenses and examines both kinds of lender. It also oversees title pledge lenders and deferred presentment companies, the state's term for payday lenders in Tennessee.

Registration runs through the Nationwide Multistate Licensing System (NMLS), and each office must carry at least $25,000 in net worth. Our sources do not set out a separate rule for online lenders. For any lender, online or not, the check is the same: search its name in TDFI's public license database before you sign.

What a licensed lender may charge

Item Tennessee rule
Rate cap 36% per year on loans of $100 or more, effective July 1, 2025 (previously 30% up to $5,000 and 24% above)
Fee option A Flat 5% service charge on the loan amount
Fee option B Acquisition charge up to 12.5% of principal, plus a monthly handling charge ($12 on $100 to $300, up to $32 on $1,750 to $2,000)
Term under option B 3 to 25 months, on loans of $100 to $2,000
Other fees Delinquency, bad check, filing, electronic payment and closing fees (up to 4% or $50)
Rollovers Not addressed in the sources used here

The fee rules come from § 45-5-403 and the rest of Part 4 of the statute. The 36 percent figure comes from an industry legal summary, not a state page, so it is worth confirming against the current code text. On a small loan, a 12.5 percent acquisition charge plus monthly handling fees can cost more than the interest does.

Why 10.85 percent is not the limit here

TDFI also publishes a weekly formula rate, which was 10.85 percent a year as of September 22, 2026. That rate is set at 4 points over the Federal Reserve's prime loan rate. It is the general ceiling, and TDFI says it is distinct from the Chapter 5 caps. It does not limit a registered installment lender.

A TDFI notice also points out that federal law can override state usury limits on certain loans. Our sources do not say whether bank partnership or tribal lenders rely on that in Tennessee. The same gap applies to cheaper options: the sources do not cover credit union alternatives or state assistance programs, so we will not name any. The warning sign is simple. A lender quoting well above 36 percent that you cannot find in TDFI's database is operating outside this law.

If a mortgage closing is weeks away

A new installment loan is new debt in the middle of an open file. Before you take one, ask your loan officer three questions:

  1. Will the monthly payment count in your debt-to-income ratio, the share of gross monthly income that goes to debt payments?
  2. Will the loan deposit or the recurring payments on your bank statements need a letter of explanation?
  3. Does paying it off before you apply, or before closing, change either answer?

The answers depend on your loan program and your lender, and none of the Tennessee sources here settle them. Get the answers in writing before you sign anything.