Hawaii's state usury law applies to which types of loans?

Hawaii's state usury law is designed to protect borrowers by regulating the maximum interest rates that can be charged on loans. This law specifically applies to loans that are issued by private individuals, which includes second mortgages held by private parties. In these situations, there is a potential for the interest rates to exceed what is legally permissible under the usury law if not monitored adequately.

Second mortgages carried by private individuals can vary widely in their terms, and without the regulatory oversight that applies to federally regulated loans such as FHA and VA mortgages, these private loans are often more susceptible to high-interest rates that could be deemed usurious. As such, the law is particularly relevant in this context to prevent exploitation of borrowers by private lenders.

In contrast, loans like FHA and VA loans, as well as conventional loans, often fall under federal guidelines and have established standards for interest rates and practices, which are not typically subject to state usury laws. Similarly, seller financing can also adhere to different regulations that may not be captured by the state usury provisions. Therefore, the specific focus of Hawaii's usury law on second mortgages held by private individuals aligns with the need to monitor interest rates in situations lacking federal oversight.