Updated October 11, 2026. Quick answer: 16% a year on a personal loan, with rates above 25% generally criminally usurious (with exceptions), according to the New York Department of Financial Services (General Obligations Law section 5-501).
New York promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | 16% a year for a personal loan; above 25% is generally criminal usury, with exceptions; loans over $250,000 (unless secured by an interest in real property improved by a one or two family residence) and loans of at least $2.5 million are treated separately |
| Rate if the note names none | Not established by the documents read |
| Penalty for charging too much | Not established by the documents read |
What New York law says about interest
The state banking regulator says General Obligations Law 5-501 sets 16% per annum and that personal loans can be made by anyone, to anyone, at 16% or less; rates above 25% are generally criminal usury.
The regulator lists loans above $250,000 as allowed between 16% and 25%, except that a March 2000 letter says the $250,000 exemption does not reach a loan secured by an interest in real property improved by a one or two family residence; it lists loans of at least $2.5 million, FHA and VA loans, and bankers’ first liens on residential mortgages as allowed above 25%.
The sources in their own words
- Interest limit: “the loan or forbearance of any money, goods, or things in action” (Banking Interpretations: Letter of March 22, 2000).
- Interest limit: “to anyone at 16% per annum or less” (Banking Interpretations: Letter of June 13, 2006).
- Interest limit: “Loans made at rates exceeding 25% to any person or entity” (Banking Interpretations: Letter of June 13, 2006).
- Exemption or penalty: “all loans that exceed $250,000” (Banking Interpretations: Letter of June 13, 2006).
- Exemption or penalty: “all loans of at least $2.5 million” (Banking Interpretations: Letter of June 13, 2006).
If you’re ready to put it in writing
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Signing the note: signature, witness, notary
None of the sections read for New York requires a witness or a notary for the note itself. A note secured by real property is a separate question; see what an intra-family mortgage requires.
How long a lender has to sue
The documents read do not state New York’s time limit to sue on a written note.
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 7% a year, paid monthly. With r = 7%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $396.02 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $23,761.20 in total, of which $3,761.20 is interest.
The 7% rate sits inside the New York limit in the table above, which is why it was chosen. The federal side of a loan between relatives is covered at family loan minimum interest rate and AFR rates by month.
A loan or a gift?
A loan that may never be repaid is taxed differently; see family loan vs gift, forgiving a family loan and gift tax by state.
What the documents do not say
- The rule is read from two Department of Financial Services interpretive letters, not from the statute text itself, because the legislature’s site could not be read.
- The legal rate when no rate is agreed, the civil penalty, the time limit to sue and the signing rules are not established by the documents read.
- Silence on a witness or notary in the sections read is not proof that no other New York law requires one.
Common mistakes
- Charging more than the limit in New York, which the table gives as 16% (above 25% is generally criminal usury), has consequences this page could not establish; the documents read do not state the civil penalty.
- Leaving the rate out: this page cannot give New York’s default rate, so write the rate down.
- Waiting too long to enforce: a time limit applies to a suit on a written note, and this page could not establish New York’s.
Related: promissory notes by state, promissory note requirements, family loan minimum interest rate, and gift tax by state.
Sources
- Banking Interpretations: Letter of March 22, 2000: https://www.dfs.ny.gov/legal/interpret/lo000322.htm
- Banking Interpretations: Letter of June 13, 2006: https://www.dfs.ny.gov/legal/interpret/lo060613.htm
Sources: the primary documents linked above, read on October 11, 2026. General information, not legal or tax advice. Statutes change and courts read them, so confirm anything consequential with a lawyer licensed in your state.