Legal Lending Limit Law and Legal Definition

A legal lending limit is the maximum amount a bank can lend to a single borrower. All types of financial services have a legal lending limit. In the U.S., governmental regulations providing the basis for calculating legal lending limit varies for national and state financial institutions. General financial condition of a borrower and a lender is considered to fix the lending limit. Calculating a legal lending limit also requires assessing the ability of the borrower to repay the debt within the terms associated with the contract with the bank.

Usually, regulations determining a legal lending limit are created and enforced on a national level. This national level regulation ensures consistency among lenders of the same type. National banks must fix same lending limit to loan and savings for a single borrower. In the U.S., lending limits are defined within the Financial Institutions Act of 1989.