You may find yourself in situations of the liquidity crisis, fortunately, this can always be remedied by taking out a loan with a bank or another operator of the general credit system. However, when you are preparing to enter into a contract of this type, it is always a good idea to adequately check the conditions applied by the intermediary, in order to avoid unpleasant future surprises. In particular, one often wonders when a loan is usurious and when a reasonably fair interest rate is applied instead.
When is a loan usurious?
To try to give an exhaustive definition to this concept, it is good to explain in detail what is meant by the term usury. The interest rate represents the cost of money, or how much you have to pay to be able to immediately dispose of capital without having to wait to accumulate it yourself. Obviously, it is easy to guess that when applying for funding there are expenses to be incurred. These derive both from the bank’s need to bear certain costs and from its legitimate need to produce a profit.
The profit of the intermediary is created, for the most part, by the range of active and passive interests. Let us try to understand this point better given its considerable importance. The bank plays the role of intermediary in the credit system, this means that it collects liquidity from the public of savers and then uses it to reinvest it in financial assets or, simply, to lend it to other subjects. When you deposit money into the bank, you receive a fee that is determined by the interest rate active for the customer. This rate constitutes the remuneration that the bank must pay in order to dispose of that specific sum. Obviously it is active for the depositor but is passive for the banking institution which has to pay it at predetermined deadlines.
The other side of the coin is the financing function that the intermediary carries out by lending the capital to the applicants. In this case, therefore, a passive rate will be applied for the interested party which constitutes in all respects an income for the creditor. The difference between these two rates, or rather the range of them, represents in very simplified terms, the profit of the bank that pays a sum to receive capital and earns a higher one when it is used.
In recent decades, following the various problems that have occurred in the banking world, the discipline in this sector has tightened considerably. This is the normal development of the principle of consumer protection, in fact with these laws we have tried, and still try, to give greater guarantees to what is the weakest part of the contract, that is the customer of the financial institution.
Therefore, a definition was needed when a loan is usurious, so as to create a national scheme, equal for all and that could be used to assert one’s rights. Usually, however, large banks never charge rates that can be considered usurious. The reason is easily understood. Although the application of a high rate may, in fact, create a higher flow of income in the short term, this type of operation would create image damage for the company which could easily cause economic damage far greater than the expected profit. Since a bank is still a company, it must respect the essential conditions of life of the same, first of all, it is the maintenance of an economic balance that is valid over time, as the masters of the business economy teach.
For this reason, each operation must be assessed on the basis of the effects that it will produce in the long term and not only in the short term. This leads all banks to try to get the maximum profit without, however, ever damaging the legitimate interests of their customers. The banking sector is very affected, in fact, by the opinion of the public opinion and if you fall into the trap of getting a bad label, then it is very complex, if not impossible, to change your image towards the outside.
When a loan is usurious and when it is not
Therefore, the problem remains of understanding when a loan is usurious and when it is not. The answer is quite simple, as a precise procedure has been established which leads to the identification of non-legal rates. In fact, the Best Bank periodically publishes an information table in which it establishes the maximum threshold that interest rates can reach, before being considered usurious.
This table is very detailed and provides an indication of the average rate and the usury rate for a long list of different operations. In fact, each class of product offered by banks obviously has a very different range of rates and for this reason, targeted communication is required for each of them.
For example, a rate significantly higher than that of factoring transactions will always be applied when opening a current account. In fact, they are totally different operations and very far from the conceptual point of view. They differ in the type of subjects that require them and also in the results they produce, for this reason, it would not make sense to always apply a uniform and constant rate. If you think you do not have a very favorable banking contract, therefore, you can always check the Best Bank table, which can be easily consulted from the internet, and understand what your real debt position is.
However, as already indicated, often these cases do not occur in the legal sector of finance, it is much easier for them to be found in the illegal sector of private loan. Unfortunately, there are still many, in fact, those who play the role of real loan sharks in our economic system. These people take advantage of the difficult situations of small business owners or families to lend them money at truly exorbitant rates.
For this reason, it would always be good to try to contact a professional operator to request a loan, at least there would be guarantees guaranteed by law that cannot be denied. Unfortunately, it is true that banks often demand liquidity conditions from loan applicants that not everyone is able to achieve. This is the main reason that still maintains a shadow economy of this type that exploits people who enslave them economically.