Usury-based

Usury-based describes practices, systems, or entities that rely on the charging of excessive or illegally high interest rates on loans. It's rooted in the concept of usury, the act of lending money at an exorbitant interest rate, considered morally wrong and, often, illegal. This term signifies a financial structure or action where the lender profits disproportionately from the borrower's need for funds, potentially leading to debt cycles and financial hardship for the borrower. The defining characteristic is the exploitation inherent in the lending terms.

Usury-based meaning with examples

• The predatory lender operated a usury-based lending scheme, trapping vulnerable individuals in a cycle of debt with exorbitant interest. Their business model thrived on the financial desperation of others, charging rates far exceeding legal limits and leveraging their clients' limited financial literacy. The company's practices led to numerous bankruptcies and foreclosures.
• Historical systems of indentured servitude were often rooted in usury-based contracts, where debts could never be repaid due to compounding interest. The practice involved borrowing money for land or equipment, with the loan growing exponentially. This type of lending facilitated exploitation and limited the borrower's opportunities.
• Critics have argued that some payday loan companies are operating with a usury-based business model. The high interest rates, coupled with short repayment terms, make it exceptionally difficult for borrowers to repay their debts, contributing to financial instability.
• The medieval Church outlawed usury-based practices, viewing them as a sin. Despite these prohibitions, clandestine lending persisted, fueling economic activity and generating significant social tensions surrounding the morality of lending.
• Some argue that certain subprime mortgage products were, in essence, usury-based, as their high interest rates disproportionately benefited lenders and were not necessarily commensurate with the level of risk involved, creating incentives for unsustainable financial practices.