Illegal-interest

Illegal-interest refers to interest rates or fees charged on a loan that exceed the maximum permissible rate allowed by law. These rates are often predatory, exploiting borrowers' financial vulnerabilities and potentially leading to a cycle of debt. Jurisdictions establish usury laws to protect consumers and prevent lenders from imposing exorbitant charges. Determining what constitutes illegal-interest involves scrutinizing the terms of the loan agreement, including all associated fees and charges, alongside prevailing regulations to ascertain its compliance and avoid overcharging.

Illegal-interest meaning with examples

• The loan shark's offer, advertised with an exceptionally low initial rate, was later found to involve hidden fees and compounding interest far exceeding the state's legal limits. Investigation uncovered his intention to make a profit out of people's struggles and financial situations by using illegal-interest to keep the debt from ever being paid.
• A payday loan company was accused of consistently charging illegal-interest rates, trapping borrowers in perpetual debt cycles. The company claimed it was necessary to cover their expenses of offering their loans, but an attorney argued their actions were predatory and harmful to the consumer.
• During the investigation into the corrupt practices of a loan firm, officials discovered multiple instances of illegal-interest charged on mortgages. It was alleged that the company was illegally making profit off of those who were not wealthy or able to keep up with the costs of owning a home.
• When the terms of a subprime auto loan were reviewed, the rate of interest exceeded the established usury limit for used car loans. A borrower who felt exploited and abused could use these points to make the loan seem less desirable and less fair, potentially even making the loan invalid.