Friendly Loans

Q. I gave an informal loan to a very trustworthy individual. Now he is making all kinds of excuses to avoid paying me back. I'm stuck in a cycle of frustration, resentment, and financial strain. What went wrong?

A. It's a bit unconventional to engage in Talmudic dialectics comparing the Torah to Shakespeare, yet there is something important to be learned comparing Divine wisdom with folk wisdom.

The Torah tells us that lending money to others in need is a vital obligation. It sternly warns us not to refrain from lending even if the approaching Sabbatical year, with its release of debts, brings an increased danger of default: "Let there not be a despicable idea in your heart, saying, 'the Sabbatical year is approaching', leading you to be stingy towards your needy brother" (Deuteronomy 15:9).

Our Sages tell us that the commandment of lending money is even greater than that of giving charity. (1) A loan preserves the dignity of the recipient and constitutes a vote of confidence that the lender has faith in his ability to be self-sufficient.

How does this square with the undeniable folk wisdom of Polonius, who advised, "Neither a borrower nor a lender be, for loan oft loses both itself and friend"?

The answer is that along with the commandment to lend, the Torah provides a framework for keeping this important mitzvah from becoming an obstacle to harmonious relations.

One part of this framework is the commandment on the borrower to pay back the loan, which we discussed in a previous column. [See: "Borrow Sorrow"]. This stern religious obligation on the borrower helps motivate him to repay the loan promptly, and to refrain from borrowing when he foresees that he would be unable to repay. The Shulchan Arukh, which is the authoritative code of Jewish law, states: "It is forbidden for the borrower to take the loan and spend excessively and have it go to loss, so that the lender is left without any way of collecting." (2)

But another, equally important factor is the strict accountability Jewish law imposes on the borrowing process. According to our tradition, "informal" loans are improper and in fact impermissible. The Shulchan Arukh states that it is forbidden to give a loan relying solely on the goodwill of the borrower. It is necessary to have either witnesses, a valid note, or some kind of surety. (3) The reason is that giving a loan with no accountability creates an excessive, almost unfair temptation on the borrower to delay and deny. This requirement explicitly applies even to a borrower who is renowned for his integrity, including a Torah scholar.

Another aspect of this accountability is that despite the great importance of the commandment to lend, we are not obligated to give a loan to someone who we consider likely to use the money irresponsibly. Indeed, the Shulchan Arukh tells us that it is better not to lend money to such an individual. (4) This is precisely the loan that loses both itself and friend.

The Torah tells us that its commandments "are not in the sky, that you should say, 'Who will ascend to the heavens and take it for us, and we will listen and perform" (Deuteronomy 30:12). Obligations that seem difficult to perform, like making helpful loans, are part of a package deal with a cohesive social and legal framework to make our charitable obligations bearable and even enjoyable. This includes carrying out our economic transactions with the greatest possible degree of transparency and accountability.

Of course there is nothing wrong with giving a loan without evidence if you explicitly allow the borrower to repay whenever he feels able. In that case, you could not bring him to court in any case. Since the loan is never due, the borrower has no reason to deny it. But if you, the lender, consider this a serious loan, then you should insist on the appropriate trappings of formality to make sure that the borrower understands your expectations and that you have the ability to enforce your legitimate rights.

The Midrash describes for us the origin of God's blueprint for the world as follows:

The Holy One blessed be He said: If I create the world based solely on [Divine] mercy, sin will multiply [because the temptation to sin is too great if there are no sanctions]. If based solely on stern [Divine] judgment, how could the world survive? [Human nature is weak and there is a need for mercy and forbearance.] Rather, I will create it with judgment and mercy, and then it has a chance to survive. (5)

Likewise, our economic transactions are effective when they have the appropriate mix of mercy and judgment. Lending money is an important expression of mercy and loving kindness, but in order to be a constructive and sustainable source of mutual aid it requires the backing of accountability and judgment.

SOURCES: (1) CM 97:1 (2) CM 97:4 (3)CM 70:1 (4) CM 97:4. (5) Bereshit Rabba on Genesis 2:4.