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Predatory Lenders in USA Exceed Established Usury Rates

Predatory Lenders in USA Exceed Established Usury Rates. Funddy

When we talk about borrowing money, usury rates come into play. In simple terms, usury refers to the interest rates charged by lenders, which can be deemed excessive or unreasonable. Laws related to usury rates are put into place to safeguard borrowers from fraudulent deals. However, despite regulations, predatory lenders in the USA still exceed the established usury rates. In this blog post, we will dive deep into the issue and explore why this continues to happen.

  1. What is Usury and Usury Law?

Usury refers to the practice of charging excessive interest rates on loans. It is defined as charging an interest rate that is significantly higher than the legally permitted rate. In the United States, individual states have their own usury laws, which are in place to provide protection to borrowers from unscrupulous lenders.

For example, (and this may vary with time and geography) in California, the maximum usury rate that lenders can charge is 10% for personal loans, while the maximum rate for licensed lenders is 36%. Any loan with a rate higher than the legal limit is considered usurious and can be taken to court for recovery of additional payments. However, some lenders still find ways to flout these laws.

  1. Why Do Lenders Exceed the Usury Rates?

There are numerous reasons why lenders choose to exceed the usury rates established by law. First, they are in business to make profits and often do whatever it takes to increase their bottom line. Second, there is a high risk associated with lending to people with a poor credit score or no credit score. This often makes it harder for them to obtain traditional loans from banks, which makes them vulnerable to lenders who may charge steep interest rates. Finally, some lenders often hide additional fees to make more money from borrowers.

  1. The Effects of Usury on Borrowers

The effects of usury on borrowers can be devastating. Borrowers who take out loans with high-interest rates often end up in a debt cycle. The interest and fees keep accumulating until it becomes difficult to pay off the loan. Many of these borrowers are forced to take out additional loans to continue making payments, which leads to even more debt. Some lenders prey on vulnerable borrowers, who end up losing their homes or filing for bankruptcy.

  1. Steps to Protect Yourself

Luckily, there are steps you can take to protect yourself from predatory lending practices. First, take the time to research lenders before applying for a loan. Check out their online reviews and ratings, and read the terms and conditions before signing. Also, be wary of lenders who advertise guaranteed approval or no credit check loans; these are often red flags and may lead to exorbitant interest rates.

In conclusion, usury rates are laws put in place to safeguard borrowers from being exploited by unscrupulous lenders. Even though many states have established legal limits for usury rates, some lenders continue to exceed these rates. Borrowers should be aware of the risks associated with high-interest loans and take the necessary steps to protect themselves when applying for loans. Remember, always read the fine print, ask questions, and do your due diligence before taking out a loan.

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