The cost of borrowing in Tennessee has been updated, as Commissioner Greg Gonzales of the Tennessee Department of Financial Institutions recently declared an increase to the maximum effective formula rate of interest. As of July 1, 2025, lenders can charge as much as 11.50 percent annually, confirmed by a news release from the Department. This uptick follows a new ceiling being set at 4 percent above the weekly average prime loan rate, itself standing at 7.50 percent as reported by the Federal Reserve.
The rate adjustment, not seen in isolation, mirrors a broader economic canvas where the landscape is shaped by Federal Reserve benchmarks. Making weekly adjustments, as the one announced on June 30 by the Federal Reserve, Gonzales' office ensures compliance with a state mandate. The obligation of announcing such changes stems from Chapter 464, Public Acts of 1983, which continues to delineate how interest rates in Tennessee are governed. This is in line with the rates agreed upon until there's another movement in the prime loan rate by the Federal Reserve, as affirmed by Commissioner Gonzales.
This financial maneuvering may have a ripple effect on consumers and businesses alike, potentially impacting loans and credit conditions across the Volunteer State. With every percentage point fluctuation, the repercussions can be felt in monthly payments on mortgages, credit cards, and business loans. This dynamic affects the pockets of consumers and the balance sheets of businesses, setting the tempo for the state's economic health.
For additional information and clarification, Alica Owen, the Public Information Officer of the Tennessee Department of Financial Institutions, remains reachable to all stakeholders. Standing at the ready to elucidate any nuances or queries, Owen can be reached at (615) 289-4738 and is a resource for greater understanding as to how these interest rate changes will unroll in the day-to-day financial dealings of Tennesseans.
