Practice Quiz

Paralegal Exam Prep

Category - Contracts

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What would a court do if a loan agreement included an interest rate above a state's usury cap?
  1. The court will order the parties to renegotiate the loan agreement.
  2. The court will not enforce the interest rate.
  3. The court will enforce the interest rate since the parties agreed to it.
  4. The court will change the interest to one point below the usury cap.
  5. The court will declare the agreement fraudulent.
Explanation
Answer: B. If a loan agreement included an interest rate above a state's usury cap, the court will not enforce the interest rate. Usurious interest rates are rates that illegally high. Each state has a law against usury that defines the level at which a rate would be usurious. Courts will not enforce a loan agreement with a usurious interest rate.
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