Lending at interest is not a sin at all. Its perfectly legitimate. But usury (lending money at unreasonably high rates) is a minor sin(an Upapataka).
Manu Smriti 10.115. There are seven lawful modes of acquiring
property, (viz.) inheritance, finding or friendly donation, purchase,
conquest, lending at interest, the performance of work, and the
acceptance of gifts from virtuous men
Manu Smriti 11.61. Defiling a damsel, usury, breaking a vow, selling a
tank, a garden, one’s wife, or child,.....(are all) minor offences,
causing loss of caste (Upapataka)(11.66)
The Yajnavalkya Smriti also lists usury among minor sins.
13 — 20. There are many Upapātakas (minor sins and
turpitude)....learning from a servant, teaching a superior, adultery,
usury, sale of salt, contemptuous livelihood, misappropriation of a
deposit, breaking of a vow, sale of meat, sale of a cow, abandonment
of father, mother or a friend, sale of tanks and parks, selling of
daughter's ornaments, crookedness, causing others to break their vow...(Yajnavalkya Smriti)
Update 1-More relevant verses:
Manu 8.140. A money-lender may stipulate as an increase of his
capital, for the interest, allowed by Vasishtha, and take monthly the
eightieth part of a hundred.
Manu 8.155. If he cannot pay the money (due as interest), he may
insert it in the renewed (agreement); he must pay as much interest as
may be due.
The Parashara Smriti says;
- To invest money on interest, to be a jeweller, to tend cattle, tillage and trade, — these are declared as occupations for the Vaisya
The verse(partly mentioned in the question) which is attributed to Vashishta is also present in the Manu Smriti. One should always read the full verse,the full scripture. Otherwise it can be misleading.
Manu Smriti 10.117. Neither a Brahmana, nor a Kshatriya must lend
(money at) interest; but at his pleasure (either of them) may, in
times of distress when he requires money) for sacred purposes, lend to
a very sinful man at a small interest.
Update 2- I also have the Vashista Dharma Sutras downloaded from Astrojyoti.com. Now here's how they have translated the verse mentioned in the question:
- Now they quote also (the following verses): ‘He who acquiring property cheap, gives it for a high price, is called a usurer and
blamed among those who recite the Veda.’
- ‘(Brahman) weighed in the scales the crime of killing a learned Brâhmana against (the crime of) usury; the slayer of the Brâhmana
remained at the top, the usurer sank downwards.
As one can see it only talks about usury which is already discussed in this answer and which the Scriptures declare as a (minor) sin.
Now,see what is being told in the next verse from the same Dharma Sutra:
43. Or, at pleasure, they may lend to a person who entirely neglects his sacred duties, and is exceedingly wicked, 43
So,basically these verses say the same thing which Manu 10.117(given above) says.
And,the verse from Parashara Smriti ,about lending money at interest, given above, is also repeated in the Vashista Dharma Sutra:
- (The lawful occupations) of a Vaisya are the same (as those mentioned above, Sûtra 16),
- Besides, agriculture, trading, tending cattle, and lending money at interest,
So,again the same thing,one should not come to a conclusion after only reading parts of a Scripture.