A friend of mine who is known to burn money and not repay loans is continuously asking me for a loan.
I have heard that one should always give a loan when asked. Should I be giving him a loan?
In Judaism, it is considered a great deed to give a loan, even to a rich person. In fact, it is considered to be greater than giving charity, for it does not make the person receiving feel needy and worthless, as if begging for survival.
Not giving a loan to a poor person when one has the available funds to do so is frowned upon in Jewish law. In the words of Maimonides, in his magnum opus on Jewish law, the Mishneh Torah:
The verse has strong words for one who does not lend money to a poor person (Deuteronomy 15:9), “Beware lest there be a defiant thought in your heart… and you look badly upon your poor brother and you not give him.”
In fact the Rebbe, Rabbi Menachem Mendel Schneerson, of righteous memory, encouraged every community to establish at least one free loan organization. The Rebbe went so far as to encourage young students to set aside some of their allowance for a free loan society so that each class could have its own organization that would loan money.
Just like there is strong language when it comes to giving loans, Jewish law also uses strong words for those who take loans without the means or the intention to repay them. Maimonides writes:
It is forbidden for a borrower to take a loan and use it when it is unnecessary, and lose it, leaving the creditor without a source to collect the debt. This applies even if the creditor is very wealthy. A person who acts this way is wicked, as Psalms says (37:21), “A wicked man borrows and does not pay.” Our sages commanded (Ethics of our Fathers 2:12), “Treat money belonging to your friend as dearly as your own.”
The Code of Jewish Law adds, “If one is known to be such a person, it is best not to give a loan at all.”
However, how can you avoid offending your friend in refusing his loan?
You should try your best to avoid him and not to lie to him by saying that you don’t have any money for him. If he continues to nudge you, you should say that at this time you have no money available. Being sensitive with ones words is very important when dealing with someone in need, no matter how crooked his or her dealings are.
See Interest-Free Loans: The Greatest Form of Charity.