Court Opinion

ID: 5060900
Source: CourtListenerOpinion
Date Created: 2021-10-01 09:17:52.22721+00
Date Added: 2024-06-11T08:19:25.485130
License: Public Domain

ON MOTION FOR REHEARING
Appellant urges the proposition that the maximum amount of finance charges that could have been charged on the loan in this case could not exceed the amount of finance charges that could have been charged if the *131loan had been repayable in substantially equal installments. Appellant contends that the maximum amount of finance charges should have been $874.99, which is the amount of finance charges allowed if the loan had been repayable in equal monthly installments and if the rate of interest charged on the loan was the maximum allowable rate of 14.5% annual percentage rate which is the equivalent of 8% add-on interest for the loan in this case.
Appellant relies upon the provision in Tex.Rev.Civ.Stat.Ann. art. 5069-4.01(3), (Vernon 1971) which provides that a lender may make loans which require repayment in irregular or unequal installments and may compute interest charges under any method or formula different from that prescribed in Section (1) of this Article (which provides for the add-on interest rate of 8% per annum for loans repayable in substantially equal monthly installments) provided the total interest charge shall not produce an interest yield in excess of that permitted under Section (1) of this Article. (Emphasis added.)
Appellant’s assumption that the statute requires that the finance charge for a loan repayable in unequal monthly installments can not exceed the finance charge for a loan repayable in equal monthly installments is without merit. The statute provides that the interest yield on loans repayable in unequal installments can not be in excess of the interest yield on loans repayable in equal installments. The interest yield refers to the annual percentage rate. The rate of interest charged on the loan in this case was 9.39% annual percentage rate which produced the finance charge of $963.51 since the loan was repayable in unequal monthly installments. The interest yield or rate of interest of 9.39% annual percentage rate does not exceed the maximum allowable interest yield or rate of interest of 14.5% annual percentage rate.
The fact that the finance charge for the loan at the rate of 9.39% annual percentage rate was more, that is, $963.51, because it was repayable in unequal monthly installments than if it had been repayable in equal monthly installments, that is, $874.99, does not mean that the rate of interest exceeded the maximum allowable rate. In the instant case, the borrower was allowed to repay the loan in unequal monthly installments by making eleven monthly installment of $200.00 and a final balloon installment of $9,671.34.
It stands to reason that the amount of the finance charge would be greater on a loan with the balloon payment because the borrower had the use of more of the lender’s money for a longer period of time than if the borrower had repaid the loan using equal monthly installments. Therefore, it is reasonable that the borrower should pay a greater finance charge because of the greater use of the lender’s money for a longer period. Even though the finance charge was greater for unequal monthly installments, the interest yield or rate of interest of 9.39% annual percentage rate was not greater than the maximum allowable rate of interest for the loan in this case of 14.5% annual percentage rate.
Appellant’s motion for rehearing is overruled.