Usury is 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 mean charging excess interest, but in some religions and parts of the world charging any interest is considered illegal.


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 religions have abstained from usury altogether as charging interest went against their core principles. Given that early lending was done between individuals and small groups, in contrast with the modern banking system used today, setting firm social standards for lending terms was deemed essential.

Specifically, Judaism, Christianity and Islam (the three Abrahamic faiths) take a very strong stance against usury. Several passages in the Old Testament condemn the practice of usury, especially when lending to less wealthy individuals without access to more secure means of financing. In the Jewish community this created the rule of lending money at interest only to outsiders. The Old Testament’s condemnation of usury also led to the Christian tradition against money lending. Some Christians believe that those who lend should not expect anything in return. The Protestant Reformation in the 16th century brought about a distinction between usury (charging high interest rates) and the more acceptable lending of money at low interest rates. Islam, on the other hand, has historically not made this distinction.

Usury Laws and Predatory Lending

Today, usury laws help protect investors from predatory lenders.

Predatory lending is broadly defined by the FDIC as “imposing unfair and abusive loan terms on borrowers." Predatory lending often targets groups with less access to and understanding of more traditional forms of financing. Predatory lenders can charge unreasonably high interest rates and require significant collateral in the likely event a borrower defaults.

Predatory lending is also affiliated with payday loans, also termed payday advances or small dollar loans, among other names. Payday loans are small-sum, short-term unsecured loans, which can appear to carry substantial risk to the lender. To prevent usury, some jurisdictions limit the annual percentage rate (APR) that a payday lender can charge, while others outlaw the practice entirely.


  1. Usury Laws

    Regulations governing the amount of interest that can be charged ...
  2. Legal Rate Of Interest

    The highest rate of interest that can be legally charged on any ...
  3. Excess Loans

    A loan made by a state chartered or national bank to an individual ...
  4. Consumer Debt

    Consumer debt consists of debts that are owed as a result of ...
  5. Retail Lender

    A lender who lends money to individuals rather than institutions. ...
  6. Unlawful Loan

    A generic term used to describe the act of giving money to another ...
Related Articles
  1. Personal Finance

    Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.
  2. Tech

    What Goldman Sachs’s Online Lending Means For Banking

    Recently Goldman Sachs has announced its entry into the online lending space. Most commonly known as an investment bank, Goldman’s newest venture may provide insight into the future of online ...
  3. Investing

    Eyeing a Loan? Consider Skipping the Banks

    Peer-to-peer lending platforms, such as Lending Tree, Lending Club and Prosper, offer borrowers newfound leverage. Here's a look.
  4. Insights

    Google Bans Ads for Payday Lenders (GOOG, GOOGL)

    Beginning in July, Google will ban lenders that charge annual percentage rates higher than 36%, since "these loans can result in unaffordable payment and high default rates for users."
  5. Personal Finance

    5 Reasons To Avoid Payday Loans

    Although payday loans may seem like an attractive option in a pinch, they may also leave you worse off in the long run.
  6. Personal Finance

    New Payday Loan Regs: Pros and Cons

    New regulations for payday lenders from the CFPB have both sides of the issue up in arms.
  7. Personal Finance

    The 4 Worst Ways To Borrow Money

    While there are less risky places from which to borrow, there are also predatory lenders who can make your financial situation worse than it was to begin with.
  8. Personal Finance

    The Best Way to Borrow

    There are many ways to secure funding. Find out the pros and cons of each way to borrow.
  9. Financial Advisor

    The 7 Best Peer-To-Peer Lending Websites (LC)

    A look at some of the most well-known and reputable peer-to-peer lending websites, their business models and successes to date.
  10. Investing

    Homeowners, Beware These Scams!

    If you're in a pinch for money, you're the prime target for con artists and thieves.
  1. What are the basic requirements to qualify for a payday loan?

    Find out the basic requirements to apply and qualify for a payday loan and understand the factors that determine when and ... Read Answer >>
  2. What is the difference between an in-store and an online payday loan?

    Learn important differences between online and in-store payday loan companies. Explore different charges made by companies ... Read Answer >>
  3. Do payday loans hurt my ability to get a mortgage?

    Find out whether taking out a payday loan could harm your chances of being approved for a mortgage and how lenders find out ... Read Answer >>
  4. What are some examples of a good time to take out a payday loan?

    Find out if it is ever a good time to take out a payday loan, and learn what you need to consider when looking at payday ... Read Answer >>
  5. How does a credit crunch occur?

    A credit crunch occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to ... Read Answer >>
  6. What impact does the Federal Reserve have on a bank's profitability?

    Learn how the Federal Reserve impacts a bank's profitability with its influence on the discount rate, federal funds rate ... Read Answer >>
Trading Center