Taking of excessive interest for the loan of money is the modern understanding of usury. In essence, however, usury is the acceptance of a premium for the mere use of a thing given in loan. Objectively it is the premium paid for a pure loan. The word has come to mean taking advantage of another who is in need. As such, it is forbidden by the natural law, because it is contrary to commutative justice. In the case of the poor, it is also a sin against charity.
Originally, in a Jewish and Christian tradition, usury meant taking any interest for a loan. It was forbidden among the Jews (Exodus 22:25; Leviticus 25:35-37) but was permitted in dealing with Gentiles. Christ, explaining the precept of charity, made no distinction between Hebrew and Gentile and stated that loans must be gratuitous (Luke 6:30; Matthew 5:42). The Catholic Church for centuries reflected this concept of usury and still teaches that, where something is loaned and later returned in kind only, no profit may be made by reason of the contract itself. Concrete circumstances, however, relative to the economic position of the lender and borrower may be involved and change the effects of the contract. Four external circumstances have an economic value and therefore constitute titles to a proportionate compensation over and above the restitution of what was loaned. They are: actual damage, loss of profit, risk to the object loaned, and danger from delay in returning what was lent. Only such titles, external to the loan, when truly present, justify the right to claim and the duty to pay a just rate of interest on money loaned.
Capitalism, with unlimited opportunities for investment, changed the function of money so that it can fructify. Consequently loaning money did not involve loss of profit to the lender and further risk of loss from delay inreturning the money loaned. By the end of the eighteenth century the distinction between usury and interest was recognized in civil law. The Church also recognized the distinction so that now only exorbitant interest is called usury and considered morally wrong. In the process, however, the Church's basic teaching on the subject did not change. Injustice surrounding money lending was and remains condemned. What changed was the economic system. As this changed, the circumstances under which an unjustice is committed changed. The Church necessarily permitted what was no longer unjust. (Etym. Latin usura, use of money lent, interest, from usus, use.)