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Make sense, forgot about inflation rate, another tool of control?
In the other side, what defines if an interest rate above X% is usury or not? it's defined by the different legislations across the world? or there's a Y% defines as a global value?
You can’t have a global value because of different currencies and rates of inflation
I would start with the 10 year treasury yield as a benchmark
If the yield curve is inverted then look at the 1 year or 90 day yield
Anything above can be considered usury except
If a borrower has terrible credit history then a lender has to raise borrowing rates to reflect credit risk
Thanks! This makes much more sense, I assume this approach on the calculation is applicable everywhere.
Thanks
We tend to look at the borrower's perspective only or the lender's perspective only and we should look at both for a fair and balanced perspective
do you mean that credit history of the lender should be on the table in this type of situation?
The borrower is asking and trying to persuade the lender to lend him money
The lender has to ascertain the credit risk of a borrower: high, low, medium, etc
Most lenders have certain criteria before they even consider a loan application
it's basically on us to make the due diligence and check before going out to the first entity to ask.
A borrower can seek pre-approval and the lender will know right away if the borrower meets their minimum requirements
typo
inflation is 4%
Usury is defined as excessive or high interest.
All interest can’t be classified as usury. For example, if inflation is 4 times and the interest you are being charged is less than 4 percent, you are getting a great deal