Posted in Finance, Accounting and Economics Terms, Total Reads: 1055
Definition: Usury Rate
The rate of interest charged for unsecured loans and is generally charged above the market rate. They can be termed as unethical and is biased in favour of lender. Also known as Loan Shark. The practice is however illegal in many countries and mainly contains historical significance. The lender is called a usurer. Usury rate can be traced to many religions and thus provides a moral touch to it. For example charging any interest rate is termed as sinful.
Some of the institutions like the Islamic banking abhors interest payment. Here the lender gets back the amount of capital and the profit the venture earns. This ensures a steady income corresponding to the risk borne by the lender. Another arrangement used is the non recourse mortgage. In this scenario the amount of loan is guaranteed by the property of the debtor. Property equivalent to loan amount is transferred to the lender. However the lender bears the risk of declining in property value. Other banks such as JAK bank provide interest free loan to its member.
In modern time many countries have put a limit on the interest rate. In Canada interest rate above 60 percent is deemed as usury. In Japan the rates must be between 15 to 20 percent. Any rate above 20 percent is liable to criminal jurisdiction.