What kind of interest is considered usury?

Usury refers to the practice of lending money at unreasonably high-interest rates that exceed the legal limit set by law. The legal interest rate varies by jurisdiction to protect borrowers from predatory lending practices. When lenders charge interest rates above this established ceiling, it is classified as usury, making the loans illegal or unenforceable. This law is in place to prevent lenders from exploiting borrowers, particularly those who may be in desperate financial situations.

Consequently, interest rates that fall below the legal limit are not usurious; similarly, loan terms that do not require repayment or interest charged on secured loans do not pertain to the usury definition. Usury specifically addresses the rate at which interest is charged in relation to legal limits, making the option that suggests interest rates above the legal ceiling correct.