Definition
A phrase used primarily in usury law to describe the two classic transactions to which usury statutes apply. A loan is the temporary transfer of money (or other fungible property) to a borrower, with the expectation of repayment. A forbearance is an agreement by a creditor to refrain from collecting or enforcing a debt already due — in exchange for consideration, typically the debtor's promise to pay interest for the extension of time.
Together, the phrase "loan or forbearance" marks the boundary of usury law's reach: if a transaction qualifies as one or the other, statutory interest rate limits apply; if it falls outside both categories, those limits generally do not.
Common Confusion
LOAN OR FORBEARANCE vs. FORBEARANCE (mortgage context): In modern real estate practice, "forbearance" commonly refers to a lender's agreement to temporarily suspend or reduce mortgage payments for a borrower in financial distress. This use is related but distinct. Usury law's "forbearance" is the older, broader concept — any agreement to delay enforcement of a mature debt for consideration. The mortgage forbearance agreement is a specific, modern application of that concept, but it carries its own regulatory framework under servicing rules and investor guidelines that has nothing to do with usury doctrine. Researchers should not assume that sources discussing mortgage forbearance agreements are analyzing the usury question.
LOAN OR FORBEARANCE vs. DISCOUNT OR SALE OF PAPER: A creditor who sells or discounts a negotiable instrument to the very debtor who owes on it is not making a "loan or forbearance" in the usury sense. The debtor is purchasing the privilege of prepayment — a transaction the courts have treated as a sale of a chattel, not an extension of credit subject to usury limits. This distinction, flagged in Bouvier's, was genuinely contested in historical case law and remains a point of analytic care.
Why It Matters in Research
The phrase functions as a jurisdictional trigger. Before researching any usury question, a researcher must first ask whether the transaction at issue is a loan or forbearance. If it is neither, usury doctrine may not apply at all, regardless of the rate charged.
Historical sources — including Bouvier's — embed this phrase in the context of nineteenth- and early-twentieth-century usury statutes, where courts drew careful lines between transactions that attracted the usury penalties and those that did not. That caselaw is dense and highly fact-specific. The Bouvier's note citing 159 Ky. 6 reflects a line of decisions holding that prepayment privileges, discounts, and similar arrangements fall outside the "loan or forbearance" category and therefore outside usury law entirely.
Modern researchers must be alert to two shifts: First, many states have either repealed or substantially modified their usury statutes, replacing them with targeted rate regulations for specific credit products (consumer loans, credit cards, payday lending). The phrase "loan or forbearance" may still appear in those modern statutes, but the surrounding doctrine has changed. Second, federal preemption — particularly for federally chartered banks — has displaced state usury limits for many lending transactions, making the common-law loan/forbearance distinction less operationally significant than it once was, though it remains relevant for transactions outside the preemption scope.
Researchers working with historical contract disputes, historical mortgage documents, or pre-twentieth-century commercial law should treat "loan or forbearance" as a term of art signaling entry into usury analysis, and should check whether the jurisdiction's courts had adopted the broader or narrower view of what qualified.
Historical Dictionary Support
Bouvier's treatment is narrow but pointed. Rather than defining "loan or forbearance" as a general matter, Bouvier's uses the phrase to illustrate its limits — specifically, that allowing a debtor to prepay a debt is not a loan or forbearance of money. The editorial logic is that a creditor selling the prepayment privilege is engaged in a sale, not a credit extension, and the proceeds should not be treated as usurious interest.
This framing reflects a broader pattern in nineteenth-century legal dictionary treatment of usury-adjacent terms: the dictionaries tended to define concepts by carving out what they did not cover, because the penalties for usury (forfeiture, voiding of contracts, in some jurisdictions criminal liability) made boundary-drawing commercially critical.
What Bouvier's does not do — and what the historical dictionaries generally do not do well — is synthesize the affirmative content of "loan" and "forbearance" as distinct concepts. The loan side was rarely contested; the forbearance side was where courts did most of their analytical work, particularly on whether an agreement to delay suit on a mature debt, made without explicit interest, could still trigger usury analysis.
Jurisdictional Note
Usury law is almost entirely state law, and the definition of what qualifies as a "loan or forbearance" has varied by jurisdiction and era. Some states applied the phrase broadly to reach any extension of credit for compensation; others narrowly confined it to formal loan instruments. Researchers working across jurisdictions should not assume uniformity in how courts have drawn these lines.
Encyclopedia Cross-Reference
Foreclosure Alternatives — Loan Modification, Forbearance, Short Sale, and Deed in Lieu of Foreclosure (The Law Mind Real Estate Transactions & Construction Encyclopedia)