Loan

Loan is a species of contract analogous to bailment, but differing in this respect; that its subject is not to be redelivered to the lender or disposed of according to his direction, but is to be applied to the use and convenience of the borrower, he yielding to the lender afterwards an equal sum by way of repayment, in addition to which there is frequently an increase by way of compensation for the use of the sum advanced, which is known as interest, but when taken to an improper amount was denominated usury. In former times it was considered by many good and learned men that all increase by way of interest was against conscience, and there were laws in this country prohibiting an excessive interest, known as the "usury laws," which existed for a considerable period, the maximum rate being reduced to 5 per cent. by a statute passed in the reign of Queen Anne. During the course of the present and the preceding reign many statutes were passed progressively mitigating or narrowing the operation of the usury laws in deference to the new opinions gradually gaining ground regarding the interest on money. Under the influence of these views the total abandonment of all restrictions upon the rate of interest was at length resolved upon by the legislature, and was carried into effect by the Statute 17 and 18 Victoria, c. 90, which repealed all then existing Acts against usury. Where nothing but personal security is relied upon the usual documents evidencing a loan are a bill of exchange, promissory note, or I.O.U. [Bailment.]