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What Are Usury Laws?

When individuals wish to borrow money or make a loan, they are charged a certain amount of money for a period of time called interest to ensure that such individuals pay on time or early. In order to avoid loaners or borrowers abusing the interest rate by setting at any rate they want, laws were created to place limitations to such interest rates. These laws are referred to as usury laws.


The practice of borrowing money or making a loan is ancient and has been recorded all throughout world history. One of the most famous fictional characters Shakespeare created was Shylock, a Jewish moneylender, was one who practiced the art of usury. Thus, the tradition of usury has been present in the past and continues to be present in almost all societies.


The business of usury involves charging those borrow money a certain interest rate that could be set far too high and unreasonable. When a loan is accompanied by too high an interest rate that could possibly jeopardize an individual’s financial situation, this instance may refer to usury. For an interest rate to be considered unreasonable and too high, several factors must be considered: the amount that was borrowed, the area where the loan was made (car, home, etc.), the financial circumstances of the individual, and even possibly religion. It has been noted that Islamic usury laws charge a higher interest rate.


Most usury laws are no longer effective due to the deregulation of a state’s financial sector. Thus, most financial institutions can set their own interest rate.

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