Lending Money

Not only is giving money for worthy causes a mitzva but even lending money for such causes is equally a mitzva as well.[1] In fact, some authorities insinuate that lending money is even greater than giving it away.[2] The Torah looks very unfavorably upon those who refuse to lend money.[3] Even lending out household objects to a neighbor in need is included in the mitzva as well.[4]

When assuming the role of a creditor, one must be sure to allow one's borrowers a reasonable and fair repayment schedule.[5] According to Torah law, one who defects on repaying a loan can have his possessions and even his land taken as repayment.[6] One must treat another person's possessions, and certainly their money, as if it were one's own.[7] It is well known that it is forbidden to lend money to another Jew on condition that it is repaid with interest, a subject beyond the scope of this chapter.[8]

It is interesting to note that it is actually forbidden to lend money to another person  unless there are witnesses present or the matter is well documented.[9] This is true regardless of the credibility of either the lender or borrower.[10] Even two rabbis lending money between themselves are required to ensure that there is someone available who can serve as a witness to the transaction.[11] We are taught that one who lends money without the presence of witnesses risks bringing upon himself spiritual misfortune.[12]

There is a minority view, however, which argues that the requirement to lend money in the presence of witnesses is to be considered "pious conduct" rather than an outright obligation.[13] It is also suggested that only those who frequently lend money to others are required to ensure that witnesses are present when doing so. This is because one who frequently lends out money to others might forget or become confused regarding the terms and conditions of each individual loan. One who rarely lends out money, however, is unlikely to forget such details. Therefore, one can be lenient in such a situation and forgo the requirement to have witnesses present.[14]

Our sages instituted the prohibition on lending money without witnesses in order to prevent disputes which inevitably arise from doing so. For example, it is entirely possible for one to innocently forget about a loan or believed to have paid it back, and other such misunderstandings which can arise.[15] Ideally, the particulars of a loan should be written down and signed although merely arranging for someone to witness the transaction suffices.  In the event that one is unable to write a memo for the loan or witnesses cannot be found, it is recommended that the borrower leave some form of collateral in order to legitimize the loan.[16] One is not permitted to accept an object as collateral that the borrower may need for survival.[17]

Unless otherwise agreed upon, one should allow at least thirty days to pass before demanding repayment of a loan.[18]However, personal possessions which have been lent out may be reclaimed by the owner at any time.[19] A lender must not tease or even intimidate a borrower who is currently unable to pay back a loan.[20] One must never renege on a commitment to give a loan or a donation to charity.[21] It is best that a husband and wife mutually agree on issues relating to lending out money or any of their household possessions.[22] It is strictly forbidden to refuse to lend money or other items based on past grudges or as an act of revenge.[23]

The mitzva of lending money to others applies to all people regardless of their financial status though poor people should be given priority over wealthier ones.[24] While it is certainly permissible and even meritorious to lend money to non-Jews, one's Jewish brethren are to take precedence.[25] Priority should be given to one's relatives, followed by one's immediate neighbors, and then the remaining poor of one's city. So too, the poor of Israel are to take priority over the poor of the Diaspora.[26] A Kohen is to take precedence over others whenever possible, followed by a Levi. Rabbis and Torah scholars should also be shown priority.[27] One should make an effort to do business with Jews, rather than with Gentiles, even if one will be forced to contend with a slightly lower profit.[28]

Making sure to properly repay one's loans in a timely and orderly fashion is a major halachic responsibility and is a mitzva in its own right.[29] Failure to do so is a concurrent violation of multiple prohibitions of the Torah.[30] One who borrows money with no intention of paying it back is regarded as a wicked person.[31] Jews who don’t pay back their loans are guilty of desecrating God's name, especially regarding monies owed to non-Jewish creditors. One should not be embarrassed to request community assistance in repaying loans. Indeed, the local charity is instructed to set aside finances and even advisors for this purpose.[32]

[1] Shemot 22:24

[2] Rambam Malveh V'loveh 1:1, Rambam Matnot Aniyim 10:7, Ahavat Chesed 1:1

[3] Devarim 15:9

[4] Netiv Hachesed 1:7

[5] Shemot 22:24

[6] Rambam Malveh V'loveh 1:4

[7] Avot 2:17

[8] Vayikra 25:37, Devarim 23:20

[9] C.M. 70:1

[10] Bava Metzia 75b, Rambam Malveh V'loveh 2:7, C.M. 70:1

[11] Aruch Hashulchan C.M. 70:1

[12] Bava Metzia 75b

[13] Ritva;Megilla 28b s.v. Teiti, Divrei Malkiel 4:136

[14] Erech Shai C.M. 70:1

[15] Ahavat Chesed 1:8

[16] C.M. 70:1

[17] Devarim 24:12

[18] Makkot 3b

[19] C.M. 341:1

[20] Bava Metzia 75b

[21] Ahavat Chesed 1:11

[22] Ahavat Chesed 2:2

[23] Vayikra 19:19, Yoma 23a

[24] Ahavat Chesed 1:3

[25] Rambam Malveh V'loveh 5:7, Ahavat Chesed 5:1

[26] Y.D. 251:3

[27] Ahavat Chesed 6:6

[28] Vayikra 25:14, Ahavat Chesed 5:6,7

[29] Ketubot 86a

[30] Vayikra 19:13, C.M. 359:8

[31] Bamidbar Rabba 18:12, Tehillim 37:21

[32] Bava Metzia 113b