“It is not my interest to pay the principal, nor my principle to pay the interest.”
—Richard Brinsley Sheridan

Rates of interest may be established by private contract or by law.

In Arizona, interest on any loan, indebtedness, or other obligation will be at the rate of 10% per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to. Interest on any judgment that is based on a written agreement evidencing a loan, indebtedness or obligation that bears a rate of interest not in excess of the maximum permitted by law will be at the rate of interest provided in the agreement and must be specified in the judgment.

Unless specifically provided for in a statute or a different rate is contracted for in writing, interest on a judgment will be at the lesser of 10% per annum or at a rate per annum that is equal to one percent above the prime rate in effect on the date that the judgment is entered. The judgment must state the applicable interest rate, and it will not change after it is entered.

Certain types of lenders and interest on certain types of loans are governed by statute. Examples of these include premium finance companies and consumer lenders, both of which are prohibited from making certain types of loans having a rate of interest greater than thirty-six percent per annum.

Under the “Rule of 72,” an obligation bearing interest at the statutory rate of 10% per annum will double in amount in 7.2 years. (To determine how long it will take to double the princi­pal amount, simply divide the interest rate into 72. The result­ing number will be the number of years required.)

Note: A person who makes an interest-free loan or a reduced interest loan may be deemed by the IRS to have made a gift. The IRS will “impute” a rate of interest in such cases.

The above article is an excerpt from Arizona Laws 101: A Handbook for Non-Lawyers, 2nd Edition (Fenestra Books, 2012), by Donald A. Loose, republished with the author’s permission. 

Disclaimer: Laws change constantly. Specific legal advice should be obtained regarding any legal matter. The information contained on this website does not constitute legal advice and no attorney-client relationship is created. 

Have any questions about this topic?
We’re ready to listen.

Related Content

FTC Announces Rule Banning Noncompetes

FTC’s final rule will generate over 8,500 new businesses each year, raise worker wages, lower health care costs, and boost innovation.

Arizona’s New COVID Laws

As COVID-19 cases continue to rise in Arizona, according to data compiled by state health officials, state lawmakers have enacted two new laws aimed at restricting responses to the malicious and malingering coronavirus.

Homeowners’ Rights in Planned Communities: The Grass Isn’t Always Greener

The new artificial grass law, which will take effect 91 days after the current legislative session ends (on or around June 24, 2022), will be added to this list of homeowners’ rights. 

Oral Contracts and Their Enforceability in Arizona

While different rules apply to proving each, one type of contract is not necessarily more enforceable than the other.

When are Written Contracts Required in Arizona?

The Arizona State Legislature, to prevent fraud, enacted a law requiring that certain promises or agreements be in writing. An action brought on an oral agreement in violation of the Statute of Frauds will be dismissed by the court.

Explore All Articles by Practice Area:
Don Loose