Under California's usury laws, if a loan is determined to be usurious, what happens to the principal balance owed by the borrower?
Correct Answer
A) The principal remains due and payable; only the interest is affected
When a California loan is found usurious, the borrower still owes the principal. The penalty falls on the interest component: all interest is forfeited. The principal obligation survives because the usury law targets the cost of borrowing, not the underlying debt itself.
Why This Is the Correct Answer
When a California loan is found usurious, the borrower still owes the principal. The penalty falls on the interest component: all interest is forfeited. The principal obligation survives because the usury law targets the cost of borrowing, not the underlying debt itself.
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