Neighborly Loan

Q. I lent some money to a neighbor, but he doesn't seem to be finding it easy to repay me. Now I find that this awkward situation is disturbing our neighborly relations. What do I do?

A. Your situation is a familiar one, and it is for this reason that Polonius in Shakespeare's Hamlet advised “Neither a borrower nor a lender be.” Lending is ill-advised because “loan oft loseth both itself and friend.”

Yet despite the unquestionable wisdom in this advice, we find that Jewish tradition strongly encourages giving loans. Giving a loan is even a mitzvah in the Torah; after the mitzvah of releasing loans in the seventh year the Torah warns us against being stingy in lending money as a result. "Surely give him, and don't be cold-hearted in giving him; because for this thing the Lord your God will bless you in all your acts and in all the works of your hand" (Deuteronomy 15:10).

In fact, this is considered the highest level of neighborly aid, and the traditional Jewish name for a loan fund is a “gemach,” a contraction of the words “gemilut chasadim” meaning simply “granting kindness”.

How then do we follow the Torah's mandate to help others with loans without creating the awkward situation described by Shakespeare?

As mentioned in a previous column, paying back loans is also considered a religious obligation. When borrowers take their obligation to repay seriously, there are fewer cases of unpaid loans and when these situations do arise the lender is likely to be more understanding.

This column will focus on what the lender can do to avoid creating an awkward situation.

A very helpful method is to donate money to a dedicated loan fund. This institution takes the personal tension out of the loan; money is not owed to the individual, but rather to the fund. One thing this does is increase the borrower's sense of responsibility; he is conscious that by returning the money he won't be helping the relatively well-off lender, which he may possibly resent, but rather will be helping other needy individuals who are waiting in line for a needed loan.

Having an established fund also helps the lender be more resolute in demanding payment. Just as the borrower may resent having to pay money to the wealthy lender, the lender may feel guilty about taking money from the needy borrower. Yet if no one pays back loans because of these sentiments the gemach system will fall apart. A fund administrator can be firm about demanding prompt repayment without feeling selfish.

But in your case, the money has already been lent. Your desire to avoid unpleasantness is understandable; it is even formalized in a mitzvah of the Torah which forbids us to pursue payment when we know the person can't pay: "If you lend money to any of my people, to the poor among you, don't be to him as a creditor, nor shall you impose interest on him" (Exodus 22:24). In fact, the Talmud states that in this case the lender is forbidden even to show his face before the borrower in a way which will specifically remind him of the unpaid debt. (1)

The best way to avoid further awkwardness is to resolve the currently amorphous situation. If you are certain that the lender is unable to pay right now, don't let the guessing game go on; make a virtue of necessity and tell him you are unilaterally giving him an extension.

If you are unsure of his ability and his needs, ask him to sit down with you and explain his situation. You certainly don't need to feel guilty about this; as the lender, you have every right to take steps to collect the money -- including pursuing equitable legal remedies if absolutely necessary. After this meeting you can decide if you will give an extension, or demand full payment of the loan as agreed; either way, the awkward uncertainty you have been experiencing will dissipate.

When good institutions clarify the obligations of all sides and good communication clarifies the needs and demands of all sides, then there is much less latitude for awkwardness and second guessing, and harmonious neighborly relations can be restored.

SOURCES: (1) Babylonian Talmud Bava Metzia 75b.