Usury

DEFINITION of 'Usury'

The act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law. Usury first became common in England under King Henry VIII, and originally pertained to charging any amount of interest on loaned funds. Over time it evolved to only mean charging excess interest, but in some religions and parts of the world charging any interest is considered illegal.

BREAKING DOWN 'Usury'

Charging interest on loans is not a new concept, but in 16th century England limitations were put on the amount of interest that one could legally charge on a loan. However, throughout history, certain regions have abstained from usury, as charging interest went against the religious principles of several different religions. One major reason why charging interest was considered forbidden is because early lending was done between individuals and small groups, which is much different from the modern banking system. Today, usury laws help protect investors from predatory lenders.