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  • March 6, 2021
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Legal Interest

The interest (interest rate) that represents the highest interest rate that a bank or financial institution can legally charge on its loans and debts. In banking and financial dealings (contracts, agreements, etc.), legal interest constitutes the highest interest rate that can be contracted or used in such dealings, as set by relevant authorities (e.g., regulators). Interest is broadly classified as legal interest and conventional interest. In setting conventional interest, the parties to a contract apply their own conventions without any intervention from others including regulators. However, conventional interest must fall within the legally prescribed interest rate, or otherwise lenders may face criminal prosecution for violation of lending laws (or usury laws).

Compare: legal interest (financial law).


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