Legal Rate Of Interest

DEFINITION of 'Legal Rate Of Interest'

The highest rate of interest that can be legally charged on any type of debt. The legal rate of interest applies to all types of debt, although this rate may differ from one type of debt to another. This limit is set to prevent lenders from charging excessive rates of interest to borrowers.

BREAKING DOWN 'Legal Rate Of Interest'

An interest rate that exceeds the legal rate of interest is classified as usury. There are usually stiff penalties for usury in most states, such as fines or even the forfeiture of principal and/or interest. The legal rate of interest can also be classified as the highest rate that lenders can charge for any legal claim that can be enforced in a court of law.

RELATED TERMS
  1. Usury Rate

    A rate of interest that is usually considerably above current ...
  2. Usury

    The act of lending money at an interest rate that is considered ...
  3. Usury Laws

    Regulations governing the amount of interest that can be charged ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Locked-In Interest Rate

    Referring to a loan where the borrower and lender agree on a ...
  6. Consumer Interest

    A type of interest that is charged for personal loans, including ...
Related Articles
  1. Markets

    Forces Behind Interest Rates

    Interest is a cost for one party, and income for another. Regardless of the perspective, interest rates are always changing.
  2. Managing Wealth

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  3. Markets

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  4. ETFs & Mutual Funds

    How Interest Rates Affect Mutual Funds

    Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors.
  5. Markets

    Explaining Interest

    Interest is the price charged to borrow money, and is typically expressed as a percentage of the principal, or the amount loaned.
  6. Markets

    Understanding Interest Rates: Nominal, Real And Effective

    Interest rates can be broken down into several subcategories that incorporate various factors such as inflation. Smart investors know to look beyond the nominal or coupon rate of a bond or loan ...
  7. Markets

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  8. Investing

    Explaining Debt Service

    Debt service is a measure of a person or entity’s use of cash to pay interest and principal on debt obligations.
  9. Trading

    Managing Interest Rate Risk

    Interest rate risk stems from the possibility that an interest-bearing asset’s value will change due to changing interest rates.
  10. Markets

    When Will Interest Rates Rise?

    Find out if -- and why -- the Federal Reserve will keep raising interest rates and what that might mean for savers, investors and the entire economy.
RELATED FAQS
  1. How do interest rates influence a corporation's capital structure?

    Learn about how changing interest rates can affect a corporation's capital structure because of their impact on the cost ... Read Answer >>
  2. Are APRs different in different countries?

    Learn about the term APR and how it is used in the United States and other countries. Explore why different lenders charge ... Read Answer >>
  3. When would a corporation want to refinance its debt?

    Favorable market conditions or the strengthening of a company's credit rating may lead to the refinancing of corporate debt. ... Read Answer >>
  4. What is the difference between real and nominal interest rates?

    Learn what nominal interest rates and real interest rates are, how real interest rate takes into account the inflation rate, ... Read Answer >>
  5. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  6. How does monetary policy impact the cost of debt?

    Learn how monetary policy impacts the cost of debt. This economics lesson explains how the Federal Reserve influences interest ... Read Answer >>
Trading Center