Credit Card Guide

What Is Usury?

27 June 2012 by CreditCardsCo™

In today's society, credit cards and personal and business loans have become as much a part of our lives as breathing and with them comes interest rates of varying percentage rates. Usury is generally defined as the practice of lending money to a consumer and charging interest rates that tend to be in an exorbitant amount.

Usury has been a part of the history of loans for as far back as can be noted. With these loans, a plethora of laws were created to protect borrowers as well as lenders. Do to usury, it is crucial that a borrower reads all documentation when getting any sort of loan or credit card. With the downturn in the economy, taking out payday loans has become another means for borrowers to acquire funds; again with these it is vital to be aware of the usury limits.

History of Usury

Throughout history, people have been taking out loans in a multitude of ways to help them acquire the things that they needed to survive on a daily basis, including loans to purchase or build a home. As loans started to become the norm in our society, so did interest rates. As the usury limits increased, a variety of laws were put into place to cap the exorbitant rates in an effort to protect the borrower. As a result lenders began losing their profits and started to stay away from even low-risk borrowers due to various laws that protected borrowers from usury. Through a series of legal precedents and court rulings, laws that were long withstanding were reversed and usury limits changed.

Things to Consider Before Getting a Loan or Credit Card

When a borrower is considering applying for a credit card or taking out a personal or business loan, it is vital that he or she read all the fine print on any and all agreements or documents associated with said loan, especially when it comes to interest rates that are charged. Usury limits on these loans can be excessively high depending on where the financial institution that is providing the loan is located, not where the actual borrower lives. Certain states have much more flexible laws, if any, regarding usury limits thus the borrower is subjected to higher usury.

Payday Loans and Usury Limits

As many people struggle in an uncertain economy, many people are finding that turning to cash advances in the form of payday loans is the way to go. Though this helps them in the short term with tending to their needs, if they are not careful the usury that is attached to them can become a financial headache. It is important to know that usury laws can become null and void upon signing the payday loan agreement. In this case, the usury is set up to protect the lender more than protect the borrower. Prior to “signing your life away” for a short term financial hand up, it is important that a borrower reads all the documentation included in the payday loan agreement and prepares for the high usury that is commonly attached with it.

In a world where so much of our financial freedom is dependent on the number of credit cards we have or the type of personal or business loans we are able to get, it is of utmost importance to be aware of the usury attached to them. Usury has been attached to loans since the first lender realized they could make a profit off of making a loan. With the development of usury, laws have been created and changed that benefit both the borrower and the lender. Borrowers must be very careful when entering into any sort of loan, including payday loans, that reading the fine print and being aware of usury is vital to prevent financial troubles in the future.

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