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Usuance - Explained

What is Usance?

Written by Jason Gordon

Updated at March 8th, 2022

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Table of Contents

What is Usuance?When is Usuance Used?

What is Usuance?

Usuance is a term commonly used in international trade to describe the length of time allowed for the payment of foreign bills of exchange according to customs. Usuance also includes an additional grace period permitted custom that is allowable between the date of a bill and its payment. Every country has unique customs and rules guiding payment of foreign bills of exchange, this tells you that usuance can vary from one country to the other. Hence, this term does not have a fixed period of time, it could range from two weeks to one month. Usuance is also attributed to the usury of goods, it describes how goods are utilized in an economy to satisfy or meet specific needs.in another context, it refers to inputs in manufacturing.

When is Usuance Used?

Usuance is applicable when goods are purchased by a buyer on credit, it is the period allowed for payment as determined by customary practice. For instance, a seller can issue a usuance letter of credit to a buyer, which awards a predetermined credit period. For instance, if a supplier delivers products to a company on the last day of the month, it means the bill of exchange is also delivered on that date. The Usuance of the sale then refers to the time the receiver of the goods has to make payment for the bill of exchange, this could be 14 or 30 days as permitted by customs. Usuance is also used in the context of a loan to describe the interest rate or fee charged by the lender for allowing a borrower use an amount of money for certain period.

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