Charging an illegally high rate of interest on a loan is known as?

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Study for the Chartered Property Casualty Underwriter 530 Exam with flashcards and multiple choice questions. Each question has hints and explanations to enhance your understanding and prepare you thoroughly.

Multiple Choice

Charging an illegally high rate of interest on a loan is known as?

Explanation:
Charging an illegally high rate of interest on a loan is called usury. Usury laws set maximum interest rates to protect borrowers from exploitative lending practices, so when a lender charges above that limit, the loan can be considered usurious and may be subject to penalties or require the excess interest to be returned. The other terms don’t fit this situation: a gratuitous promise is a promise made without consideration and is generally unenforceable; insurable interest is about having a legal stake in the subject of an insurance contract; negligence is a failure to exercise reasonable care.

Charging an illegally high rate of interest on a loan is called usury. Usury laws set maximum interest rates to protect borrowers from exploitative lending practices, so when a lender charges above that limit, the loan can be considered usurious and may be subject to penalties or require the excess interest to be returned. The other terms don’t fit this situation: a gratuitous promise is a promise made without consideration and is generally unenforceable; insurable interest is about having a legal stake in the subject of an insurance contract; negligence is a failure to exercise reasonable care.

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