Updated October 12, 2026. Quick answer: No person may charge interest above the greater of 21% a year or 9 percentage points over the prime rate, and a contract above the cap is usurious and void (except for regulated financial institutions, which forfeit the entire interest instead) (R.I. Gen. Laws 6-26-2 and 6-26-4).
Rhode Island promissory note at a glance
| Item | What the documents say |
|---|---|
| Maximum interest rate on a private loan | The greater of 21% a year or prime plus 9 percentage points, uncompounded and not taken in advance |
| Rate if the note names none | 12% a year ($12 on each $100) in business transactions where interest is secured or paid, and on judgments; the section reads nothing for a non-business loan |
| Penalty for charging too much | A contract above the cap is usurious and void (a regulated financial institution instead forfeits the entire interest), and a willful and knowing violation is criminal usury punishable by up to five years in prison |
What Rhode Island law says about interest
Rhode Island bars any person loaning money from charging interest above the greater of 21% per annum or prime plus 9 percentage points, uncompounded and not taken in advance.
Absent a different expressly stipulated rate, post-judgment interest and interest in business transactions where interest is secured or paid are computed at twelve dollars on one hundred dollars for one year (12%).
A contract violating the cap is usurious and void under 6-26-4(a) (regulated financial institutions instead forfeit the entire interest under 6-26-4(d)); willful and knowing violation is criminal usury, up to five years imprisonment under 6-26-3. The cap does not apply to duly licensed pawnbrokers, credit card transactions (chapter 26.1) or matters governed by title 19, and there is no limit on a loan to a commercial entity above $1,000,000 not secured by a mortgage on a borrower’s principal residence, if the entity first obtains a pro forma analysis by a Rhode Island CPA showing the loan can be repaid.
The sources in their own words
- Interest limit: “greater of twenty-one percent (21%) per annum or the alternate rate” (R.I. Gen. Laws 6-26-2 Maximum rate of interest).
- Rate when none is agreed: “twelve dollars ($12.00) on one hundred dollars ($100) for one year” (R.I. Gen. Laws 6-26-1 Legal rate of interest).
- Exemption or penalty: “shall be usurious and void” (R.I. Gen. Laws 6-26-4 Usurious contracts: Penalty).
- Exemption or penalty: “shall be imprisoned for not more than five” (R.I. Gen. Laws 6-26-3 Criminal usury).
- Time limit to sue: “must be commenced within six years after the due date or dates” (R.I. Gen. Laws 6A-3-118 Statute of limitations).
- Time limit to sue: “commenced within ten (10) years next after the cause of action” (R.I. Gen. Laws 9-1-13 Limitation of actions generally).
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Signing the note: signature, witness, notary
Under R.I. Gen. Laws 6A-3-401 a person is not liable on an instrument unless the person signed it or an agent signed for them, and a signature can be any word, mark or symbol adopted to authenticate a writing. A note is signed by the person who promises to pay.
None of the sections read for Rhode Island 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
Rhode Island gives six years after the due date to sue on a note payable at a definite time (R.I. Gen. Laws 6A-3-118), and ten years for civil actions generally (9-1-13).
A worked example: a $20,000 note
Suppose a relative lends you $20,000 and you sign a note for 5 years at 8% a year, paid monthly. With r = 8%/12 and n = 60 months, the level payment is principal times r divided by (1 minus (1 + r) to the power of negative n): $405.53 a month, computed here from these assumed inputs, not quoted. Over the 60 payments that is $24,331.80 in total, of which $4,331.80 is interest.
The 8% rate sits inside the Rhode Island 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 cap is lifted for some commercial-entity loans above $1,000,000; the conditions are not reproduced here.
- Which of the two time limits governs a particular note is a legal question the documents read do not settle.
- Silence on a witness or notary in the sections read is not proof that no other Rhode Island law requires one.
Common mistakes
- Charging more than the limit in Rhode Island, which the table gives as the greater of 21% or prime plus 9 points, makes the contract usurious and void (a regulated financial institution instead forfeits the entire interest), and the borrower can recover any payment made (6-26-4).
- Leaving the rate out: Rhode Island’s 12% default (6-26-1) is written for post-judgment interest and business transactions where interest is secured or paid; the section read says nothing about a non-business note, and the rate is rarely what the parties meant.
- Waiting too long to enforce: Rhode Island allows 6 years (note); 10 years (general civil) to sue on a written note.
Related: promissory notes by state, promissory note requirements, family loan minimum interest rate, and gift tax by state.
Sources
- R.I. Gen. Laws 6-26-2 Maximum rate of interest: https://webserver.rilegislature.gov/Statutes/TITLE6/6-26/6-26-2.htm
- R.I. Gen. Laws 6-26-1 Legal rate of interest: https://webserver.rilegislature.gov/Statutes/TITLE6/6-26/6-26-1.htm
- R.I. Gen. Laws 6-26-4 Usurious contracts: Penalty: https://webserver.rilegislature.gov/Statutes/TITLE6/6-26/6-26-4.htm
- R.I. Gen. Laws 6-26-3 Criminal usury: https://webserver.rilegislature.gov/Statutes/TITLE6/6-26/6-26-3.htm
- R.I. Gen. Laws 6A-3-118 Statute of limitations: https://webserver.rilegislature.gov/Statutes/TITLE6A/6A-3/6A-3-118.htm
- R.I. Gen. Laws 9-1-13 Limitation of actions generally: https://webserver.rilegislature.gov/Statutes/TITLE9/9-1/9-1-13.htm
- R.I. Gen. Laws 6A-3-401 Signature: https://webserver.rilegislature.gov/Statutes/TITLE6A/6A-3/6A-3-401.htm
Sources: the primary documents linked above, read on October 12, 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.