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Thought for the Day: What You Can and Can't Pay/Do for a Loan

The Torah forbids a Jew to charge another Jew interest for a loan.  In fact, the Torah also forbids a borrower from paying interest on a loan.  In support of that, many (most?) Orthodox Jewish communities support one or more free loan funds.  The funds are called a "gemach"; which is really just an acronym for "g'milus chesed"/loving kindness.  These loans can be for a little as a few hundred dollars (or less, actually) to 10 of thousands of dollars (or more, actually).

The first loan I took from a frum Jew occurred when I was visiting a rav/friend in Eretz Yisrael.  I wanted to get a nice piece of silver jewelry for my wife (I got to Eretz Yisrael on a business trip).  My host took me to a jewelry store that specialized in silver.  I found something in my budget, went to pay and discovered I had left my wallet at my host's home.  He lent me the money and asked me to write a shtar/contract; just and IOU, really, but halachically binding -- and, in fact, halachically mandated.  In any case, I was able to pay back that loan in a matter of hours.

The halachic definition of ribis is somewhat broader than simply "interest on a loan".  Obviously, making a deal to borrow 100$ for thirty days on condition that the borrower will repay 110$ is ribis and forbidden by the Torah.  Perhaps not as obvious, a deal to borrow 100,000$ for six months on condition that the borrower will shovel the lender's sidewalk all winter is also ribis; even though the borrower will only pay back the 100,000$ on the due date.  Even less obvious: suppose the borrow and lender live in the same community, but don't know each other well enough that they would go out of their way to say good Shabbos to each other in Kol Tuv on a Friday afternoon.  If the borrower now feels a need to seek out the lender to give him a hearty "Good Shabbos" on Fridays because of his feelings of gratitude for the loan, that would be ribis and is forbidden.  That is true even after the loan is repaid.

It also makes no difference if the lender is just forwarding interest charges that he also has to pay.  For example, when I allow my children to borrow money by using my credit card, I can only collect a repayment of the actual charge; I could not, for example, just tell them to pay off the credit card company on their own schedule.  The interest charges are mine and mine alone.  (The principle often ends up being mine also, but that's another matter...)

The rule is that any benefit received by the lender from the borrower that is motivated by the loan -- and is therefore essentially a fee for using the money -- is ribis and is forbidden.  It makes no difference if the benefit was requested by the lender or offered by the borrower; in any case it is forbidden.

Things that are not a fee for use of the money, however, are permitted.  For example, if my host had not had the cash and needed to get the money from an ATM, I could pay that fee.  The ATM fee is just that -- a fee for using the ATM, not a fee for using the money.

Another example is when the borrower defaults on the original loan terms and is not able to repay on time.  R' Fuerst's example was a lender who borrowed 100,000$ for six months (and had every expectation that he would be able to repay in that time), but because of unforeseen circumstances is not able to repay for two years.  In that case, there borrow may give the lender extra money after the loan is repaid.  Since it was not stipulated ahead of time and the loan terms were fair and the it was entirely the borrowers idea, the extra is permitted.  R' Shlomo Zalman Auerbach says it is more than permissible, it is really an obligation of derech eretz/good manners for the augmas nefesh/distress he caused the lender.

As always, of course, CYLOR before trying this... that's always true, but so much more important with Choshen Mishpat issues which are very often d'oraisah.

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