Financial Metrics · Intermediate level · 3 min read ·
What is the usury rate?
The usury rate is the highest interest that can legally be charged on a loan in Colombia. It equals 1.5 times the interés bancario corriente, the reference rate the Superintendencia Financiera certifies for each type of credit, and it is expressed as an effective annual rate (EA). Charging above it is a crime.
In 30 seconds
- It is the legal cap on loan interest: 1.5 times the interés bancario corriente.
- The Superintendencia Financiera certifies the interés bancario corriente for each type of credit.
- It is expressed in EA, and charging above the cap is the crime of usury.
Why should you care?
A comfortable installment can hide a very high interest rate. The usury rate is the line the law draws so that this has a limit.
- You recognize when a loan charges more than the law allows.
- You compare a loan's rate with the cap in the same unit: EA.
- You protect yourself from informal lenders charging interest outside the law.
Think of it as the speed limit
On a road each lane has its top speed, and going over it is penalized. The usury rate is the speed limit for interest: it changes by type of credit, it is updated periodically, and whoever exceeds it commits a serious offense.
How does the usury rate work?
- 1
The reference rate is certified
The Superintendencia Financiera certifies the interés bancario corriente for each type of credit; for consumer and ordinary credit, every month.
- 2
The cap is calculated
The usury rate is that rate times 1.5, under article 884 of the Commercial Code.
- 3
It covers all interest
The cap applies both to the loan's interest and to late-payment interest.
- 4
Exceeding it is a crime
Article 305 of the Criminal Code penalizes charging interest above that limit.
The formula
Usury rate (EA) = Interés bancario corriente (EA) × 1.5
- Interés bancario corriente
- = the rate the Superintendencia Financiera certifies for each type of credit
- 1.5
- = the multiplier in article 884 of the Commercial Code
An example with numbers
Illustrative arithmetic, not the current values: suppose the interés bancario corriente for one type of credit is 16% EA and someone offers a loan at 2% a month.
| Interés bancario corriente | 16% EA |
|---|---|
| Usury rate (16 × 1.5) | 24% EA |
| Loan at 2% a month, in EA (1.02^12 − 1) | ≈ 26.8% EA |
| Result | Above the cap |
2% a month looks small, but compounded over a year it comes to about 26.8% EA, above the 24% cap. That's why you always compare in EA.
Where do you see it at Circular Urban?
The usury rate doesn't appear on any Circular Urban screen: your participation is not a loan, so it has no interest rate and no usury cap. We explain it because it is a key concept for your finances and uses the same unit you'll see on the platform: the effective annual rate.
- Each project sheet, in Profitability, where rates are expressed in EA.
What changes in your finances once you get it
You convert everything to EA
If you're given a monthly rate, you convert it to EA before comparing it with the cap.
You check the type of credit
You look up the interés bancario corriente certified for your type of credit and month.
You're wary of informal lenders
Loans outside the formal system often charge interest far above the legal cap.
Common mistakes
- Myth
2% a month is the same as 24% a year.
- In reality
With compounding, 2% a month equals about 26.8% EA. Multiplying by 12 understates the real rate.
- Myth
There is a single usury rate for every loan.
- In reality
There is one per type of credit, because the interés bancario corriente is certified separately for each.
- Myth
If I signed the contract, the agreed interest is valid even above the cap.
- In reality
Signing doesn't change the legal limit: the cap still applies and charging above it is a crime.
Test yourself
If the certified interés bancario corriente for a type of credit were 18% EA, what would the usury rate be?
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