About 9 months ago, I was in a financial bind. Pretty bad, and the only thing I could think of to do was call the Cash Call people.
For those of you that haven’t seen Gary Colemans commercial, Cash Call loans money. They will loan money to just about anyone, even if you have bad credit.
I qualified for a $5000 loan, and accepted it.
My interest rate is 59%. My minimum payment (that I have been making religously) is $250. I believe my payment this month actually broke the $1 to the actual principal barrier.
I understand that usury is loaning money at high rates… essentially loan sharking. At what point does that happen? When does a loan with high interest become usury?
I’m not trying to duck out of my loan… I signed up knowing what the deal was, I am just curious.
If nothing else, I’ve got great “I’ve got worse percentages than you” when all my co-workers start talking money. Hehehe…
Is that 59% a year? Jeezus, you need to not spend another cent on anything else you don’t need to continue living and pay that off ASAP. One single hiccup in your personal finances and it will blow out to unmanageable proportions and you’ll be looking at bankruptcy.
Biblically, usury is loaning money at any interest rate at all.
At what rate it becomes illegal depends entirely on what jurisdiction you and the lender are in.
I’m not your lawyer; you’re not my client; this isn’t legal advice and I offer no opinion regarding your situation.
I don’t know where you are, but if you’re in California, you may want to acquaint yourself with Article XV of the California Constitution, which governs usury.
If you’re not in California, consider searching the codes at findlaw to see what they have to say about usury. It’s going to vary from place to place.
The definition of usury is a tough one. Currently mainstream Islamic thought is that loaning money for interest is a sin. Loaning money for a piece of the action is OK.
People here take car loans, repay the amount and then give the company a ‘gift.’ I have a local account, it does not pay ‘interest.’ It yields ‘fruits.’ That way it is not a sin.
An informal definition (not a legal one) might be that usury is what we would now call “debt bondage” or “loan sharking”: the person who loaned you the money doesn’t really want you to be able to pay it off; they want you to be stuck paying interest forever.
I incorporate everything Campion said, including the disclaimer. In addition, once you find your state’s usury statute, don’t get to excited if it generally sets forth a limit of less than the amount you are paying. Often, there are exceptions to the usury cap found elsewhere in a state code.
Here in the UK, I can borrow money on a mortgage (about 7% interest, but house is at risk), on an bank overdraft (9.9% interest, only available to regular customers), on a bank loan (about 8%, need to be employed) or on a credit card (about 22%).
There was some discussion in Parliament recently that an interest rate above 30% was usury and should be made illegal.
I am seriously staggered that anyone is quoting a rate of 59%.
Or that anyone has to take it.
Right–often a distinction will be made between a “commercial” transaction and loans betweeen individuals. Note also that a financial institution with multistate operations usually gets to apply the usury law of its state of incorporation–I believe that one of the Dakotas has been the state of choice for credit card issuers for some time.
Further to Paul in Saudi’s post, I believe Islamic mortgages work much like this: the bank buys the house for you, and let you live in it while you buy it from them, in instalments that total more than what they paid for it. This is, by some piece of doublethink, not counted as charging interest. What the Prophet (pbuh) would say is anyone’s guess.
Heh. You think 59% is bad. Check out those Pay Day/Cash Advance places they got here in Chicago. I was looking at their rate table once, having to Western Union some money, and on a $1000 loan, you need to pay back $1500 by the end of the month. That works out to 600% annual! :eek: I’ve heard it can get as bad as 1800% apr. They’re not meant as annual loans, but they are a problem here in Chicago. You get behind one payment, and you’re completely screwed.
Well, depending on how the muslims define ‘action’, it kind of sounds like drawing a distinction between making a business loan and buying a portion of a business venture.
If you lend me $500 to drive to Montreal, buy some digital watches, take them back to Toronto and sell them, then the risk of the endeavour is on me. If I get carjacked in Kingston on my way back, then not only have I lost my car and any money I put into the watches myself, but I have to worry about paying you back the $500 without anything to sell.
If you pay $500 for a 40% share of the action, then if the deal is a bust, you lose out too. On the other hand, if the profits come to more than we expected, you get to share in it. It does make a little sense that this is more ‘righteous’ than lending for interest, because the payback is automatically nullified (or greatly reduced) if misfortune strikes.
On the other hand, it’s not a model that could be applied easily to a lot of loans, because it would be harder to define what the ‘action’ is on a house loan, say. Just my $0.02 as usual.
I’ve always thought that the usury laws were pretty funny.
Make a law regarding loans of money, and then exempt basically every single type of company that loans money as a business.
The only time I’ve seen a usury law work to protect a borrower was with respect to an employee that borrowed money from the boss at 12% per year (a rate that, compared to a credit card rate, seemed fair to everyone). When the employee was fired for misconduct, he sued the boss for usury.
Yeah, I saw a rate like that (it was around 400%) posted at one of those quick cash places. I don’t normally do business at those places, but I had to cash a check that was about to expire. I thought surely the 400% had to be a misprint. How could that possibly be legal? Credit card rates are capped at like 22%, right?
Then I started hearing stories on the radio and seeing threads like this and realized this was indeed a real thing going on. I guess it is just another example of the government protecting business over poor people.
Depends on who is doing the defining, which depends on who is doing the lending and who is doing the borrowing, where they all are, and where the lender has branches under some circumstances.