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# Tennessee Sets Formula Interest Rate at 10.75%
- URL: https://www.theamericanquorum.com/state-news-tennessee-2026-09-16-a/
- Published: 2026-09-16T23:25:59.000Z
- Updated: 2026-09-16T23:25:59.000Z
- Description: Tennessee’s maximum effective formula interest rate is 10.75%, based on a 6.75% prime rate. The state separately set October’s home-loan ceiling at 10.78%, underscoring that different loan categories follow different rules.
- Author: News Desk
- Tags: State News, Tennessee

Tennessee’s maximum effective formula interest rate is now 10.75% a year, a ceiling that will remain in place until the underlying average prime rate changes. Commissioner of Financial Institutions Greg Gonzales announced the figure on September 15, one day after the Federal Reserve published the prime-rate input used in the state calculation.

The [Tennessee Department of Financial Institutions said](https://www.tn.gov/tdfi/tdfi-how-do-i/info/formula-rate.html?ref=theamericanquorum.com) the ceiling equals the weekly average prime loan rate of 6.75% plus four percentage points. State law requires the commissioner to announce the formula rate each week, but the number does not automatically change every week: the department said 10.75% stays effective until the Federal Reserve’s average prime rate moves.

Federal data support the state’s underlying figure. The Federal Reserve’s [September 16 H.15 release](https://www.federalreserve.gov/releases/h15/) showed the bank prime loan rate at 6.75% for every reported business day from September 9 through September 15\. The Fed defines prime as the rate posted by a majority of the 25 largest insured U.S.-chartered commercial banks and says banks use it as one of several base rates for pricing short-term business loans.

## The mortgage ceiling is a separate number

Borrowers should not read the weekly 10.75% formula rate as a universal cap for every Tennessee loan. The state publishes a separate maximum effective rate for home loans, and [the department has set that ceiling at 10.78% for October 2026](https://www.tn.gov/tdfi/tdfi-how-do-i/info/mortgage-rate-of-interest.html?ref=theamericanquorum.com). That calculation uses a different benchmark: four percentage points above the average prime offer rate for a 30-year fixed loan. The department said the most recent applicable benchmark was 6.78%.

The distinction matters because the two state notices operate on different schedules and rely on different reference rates. The general formula rate can move when the weekly average bank prime rate changes. The home-loan ceiling is announced for a calendar month and is tied to the mortgage-focused average prime offer rate. A quoted rate from a lender may be lower than either ceiling, and the applicable legal limit depends on the loan’s category and governing law.

Tennessee’s own mortgage notice also includes an important qualification: federal law may preempt state usury limits for certain loans made after March 31, 1980\. The department advises people affected by the home-loan ceiling to consult legal counsel about how the federal Depository Institutions Deregulation and Monetary Control Act and its regulations apply. That warning is a reason to treat the published maximum as a regulatory reference point, not as a substitute for reviewing a specific contract.

## What borrowers and businesses should check

For a Tennessee borrower comparing offers, the useful first question is which state rate framework—if any—covers the transaction. The next is whether the lender’s quoted interest rate, fees and repayment terms match the written agreement. Businesses with contracts linked to prime should also note that the Federal Reserve’s 6.75% figure was unchanged across the five most recent reported dates, but the state formula rate can adjust after a future change in the weekly average.

The immediate takeaway is narrow but practical: 10.75% is Tennessee’s current weekly formula ceiling, while 10.78% is the state’s separately calculated home-loan ceiling for October. They are close in value, but they are not interchangeable.