Can my coworker legally charge me 10 of the amount he loaned to me per DAY if I don’t pay him back on time?

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Can my coworker legally charge me 10 of the amount he loaned to me per DAY if I don’t pay him back on time?

I borrowed 500 from my coworker and agreed to pay him 10 per month for interest. The loan was for 2 months. So I owed him 600 on June 30th.I asked him if I could have one more month to pay him back and he said per the agreement I have to pay him 50 a day until I pay him in full. Then he told me verbally that he would cut me a deal and charge me 100 per week instead of 50 per day until July 30th or he will take me to court. Is this legal?

Asked on July 2, 2019 under Business Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

1) First, you only have to pay the amount of interest that the loan agreement said you would, as that agreement stood when you took it out. He cannot change the agreement and add or increase interest after the fact (after you received the loan). Contracts--and loan agreements, whether written or oral, are contracts--may not be unilaterally changed by one side after the fact. You only have to pay what you agreed to pay.
2) $100/week is the equivalent of $5,200 per year. That is almost 900% interest on the $600 you mention. That amount is FAR in excess of any amount allowed under the law and would be considered illegal "usury."


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