Usury laws establish a legal ceiling on interest rates, limiting the amount of profit lenders can make on loans. This is intended to protect borrowers from being charged exorbitant interest rates that can lead to financial hardship. However, this may also restrict the availability of credit, particularly for borrowers without strong credit histories or collateral to offer.

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Usury Laws

Question 49

Multiple Choice

Usury laws

A) allocate funds from low-productivity to high-productivity investments.
B) establish a legal ceiling on interest rates.
C) make more funds available to low-income borrowers.
D) create a surplus of loanable funds.

Correct Answer: