Interest

a sum paid for the use of money. Excessive interest is called usury. Ordinary debts do not bear interest unless there be an agreement to that effect. In case A buys of B and promises to make payment at a certain date and fails to do so, B cannot collect interest. If, however, A as defrauded B and B sues, he may recover with interest. Money loaners have usually a higher rate of interest for a small sum than for a large one, for a short time than for a long time. The greater the risk, the greater the charge for interest; the better the chance for investment, the higher the rate of interest investors are willing to pay. School districts, cities, counties, states, and nations pay very different rates of interest. An old, well established community, fairly out of debt, can borrow a large sum on long time at a very low rate. A new town with an uncertain future must pay a much higher rate. The United Kingdom is one of the greatest borrowers in the world. It is considered such good pay that the British national debt bears only from two and one-half to two and three-fourths per cent interest. During the Civil War, when the outcome was uncertain, United States bonds bore interest as high as seven and three-tenths per cent. Our bonds now bear from two to four per cent. The South American republics pay from three to five per cent. China pays as high as seven percent. During the late war between Japan and Russia both countries borrowed heavily. The rate rose as high as six per cent.

The various states and provinces have fixed what is known as a legal rate which governs in the absence of an agreement to the contrary. Some states permit a higher rate of interest, say eight, ten, or twelve per cent, if agreed to in advance by both parties. The legal rate in nearly all states and territories is six per cent. The legal rate in Illinois is five per cent; in California, Georgia, Nebraska, Nevada, North Dakota, South Carolina, and South Dakota, it is seven per cent; in Alabama, Colorado, Florida, Montana, Utah, and Wyoming, the legal rate is eight per cent; in Idaho, it is ten; in all others it is six.