Nashville, TN - On Thursday, March 6, 2025, the Tennessee Senate passed Senate Bill #694 with a 22-4 vote, paving the way for higher interest rate caps on certain personal loans. The legislation, which now moves to the House, allows industrial loan and thrift lenders to raise their maximum interest rates from 24% to 36% on loans exceeding $5,000. For loans under $5,000, the cap would also increase to 36%.

These lenders primarily serve individuals with poor credit who are unable to secure loans from traditional banking institutions. Proponents of the bill, including Republican sponsors, argue that the changes are necessary to keep these lenders competitive and to offset the risks associated with lending to non-traditional borrowers. State Representative Mike Sparks (R-Smyrna) emphasized the importance of providing access to credit for those in financial need.

Critics, however, warn that the higher rates could exacerbate financial struggles for vulnerable Tennesseans, potentially trapping them in cycles of debt.