When creditors lend money to borrowers, they usually charge a sum of interest on the loan. Most people consider this to be reasonable, provided that the interest rate set is not too high, and it has become accepted practice. In the past, charging interest on a loan was thought to be immoral and it was often also illegal. The practice was condemned under the label of ‘usury’.
Modern economic theory can explain why interest payments are necessary to ensure that lenders are willing to lend money. However, the criticism of interest payments is based on religious and philosophical arguments. There are concerns that charging interest may be exploitative.
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