I understand that the State of TN has a 4% limit on the loan fee amount that can be charged on consumer installment notes. Further, if we are making a new loan for our customer and part of the proceeds will be paying off an existing loan balance on 2 unsecured notes, then we can only charge the 4% on the new proceeds amount, correct? My question is, if the new loan is to be secured by Real Estate, then would the 4% limit still apply? My thoughts are that it would not, because it would then be classified as a Real Estate loan, and not a consumer installment loan. What about if the collateral was equipment, would the 4% limit apply then?

Any help on this would be greatly appreciated.

Because of the various acts that govern rates and fees in Tennessee, you may wish to take this to a lawyer. I dug out a legal opinion I have that covers this topic and it can be complicated.