Printed from chabad.org
All Departments
Jewish Holidays
TheRebbe.org
Jewish.TV - Video
Jewish Audio
News
Kabbalah Online
JewishWoman.org
Kids Zone

The Mitzvah of Giving Loans

The Mitzvah of Giving Loans

Parshat Re'eh

Advanced Advanced
E-mail

It is a great mitzvah to provide loans to the needy. As we read in Deuteronomy1: "If there will be among you a needy person, from one of your brothers in one of your cities, in your land that the L-rd, your G‑d, is giving you, you shall not harden your heart, and you shall not close your hand from your needy brother. Rather, you shall open your hand to him, and you shall lend him sufficient for his needs, which he is lacking."

Loans are also mentioned in Exodus2: "When you lend money to My people, to the poor person [who is] with you, you shall not behave toward him as a lender; you shall not impose interest upon him." From here we learn that giving an interest-free loan is actually a Torah obligation. This remains true despite the fact that the lender could have used the money at that time to accrue interest in a bank or other type of investment.3

Giving loans is one of the mitzvot for which one receives a reward both in this world and in the World to Come.4 In fact, it is considered a greater mitzvah than the mitzvah of giving charity5 because it is less embarrassing for a needy person to take a loan than to receive charity. In addition, by providing a loan in a timely manner, one can prevent a person from reaching a state of poverty in the first place.6

In fact, if a person has a certain amount of money and receives two requests for it, one for charity and the other for a loan, he should give it as a loan. The person who is asking for charity is probably used to asking and will not hesitate to ask someone else, whereas the one who is asking for a loan is likely not used to such requests, and may have no one else to turn to.7

To ensure that those who need a loan will be able to receive one, it is proper for each Jewish community to establish a free loan fund. Members of the city should donate money to the fund which in turn can be used to provide interest-free loans to locals in need. Those who contribute to this fund are continually doing mitzvot with their money, even while sleeping, eating, etc. Those who administrate the fund receive a great reward for this, as the verse states8: "One who pursues charity and kindness shall find life, charity, and honor."9

Following are some of the laws relating to this mitzvah:

To Whom Must One Lend

  1. When deciding to whom one should lend money, one should give precedence to one's own family members, then to members of one's city, then to the Jews in Israel, and finally to the Jews in the rest of the world.10
  2. One should also extend loans to poor non-Jews.11 But one is allowed to charge interest from a non-Jew.12
  3. It is also a mitzvah to lend money to a rich person if he needs it for some reason,13 but one should give precedence to the poor.14
  4. One who is asked for a loan for an amount of money that he can afford, has an obligation to provide it—up to one fifth of one's wealth.15 More than that a person is not obligated to lend.
  5. The obligation, however, does not apply if the lender does not trust that the person requesting the loan will pay him back.
  6. It is preferable not to provide a loan to a person who will not be able to repay it16 in order to avoid demanding repayment of a loan from a person who cannot afford to do so, which is forbidden by halachah (see below).
  7. It is also a mitzvah to lend objects to people that need them. Although this is technically not included in the mitzvah of lending money, it is included in the general mitzvah of Ahavat Yisrael, loving one's fellow.17

Recording the loan

  1. One should make sure to record the loan in a proper document. This is important even between friends or Torah scholars. Without documentation, it is possible that one party will make the simple mistake of forgetfulness.18
  2. One may also call upon other people to act as witnesses, but documentation is better as the witnesses may leave the area.19

How the Borrower May Use the Loan

  1. A borrower may not squander the money on risky investments, unless he has informed the lender beforehand of his specific intentions.20
  2. Nor may the borrower waste the money on non-essential items in such way that he has nothing left to repay at the end of the term of the loan.21

The Obligation to Repay Loans

  1. Immediately when the loan is due,22 the borrower is obligated to repay the money. In the words of King Solomon23: "Do not say to your fellow, 'Go and return, and tomorrow I will give,' though you have it with you."
  2. If the borrower does not have the money, he must sell his possessions and even his home to repay the loan. He may only keep for himself the most basic necessities.24
  3. One must sell his holy books and even a Torah scroll in order to repay a loan.25

If One Cannot Afford to Repay a Loan

  1. One who owes money but cannot afford to repay it (either with cash or with his possessions) cannot be forced to work in order to repay his debt.26
  2. Nevertheless, as long as one has not repaid his debt, he is called27 "a wicked man who borrows and does not repay."28 To avoid this moniker, one should endeavor to work and repay all loans.29
  3. Any money earned through work must be used to repay the debt (with the exception of money used to provide for the borrower's most basic needs).30
  4. Any gift the borrower receives must be used to repay the debt, unless the giver specifies that it is not to be used for that purpose.31
  5. Certainly, one who owes money may not go on vacation or spend any money other than on basic essentials.32
  6. It is clear that the money one earns should be used for repaying the debt and may not be given to charity.

Pressure to Repay

  1. If a lender knows that the borrower does not have the money or possessions to repay his loan, he may not pressure him to repay.33
  2. In fact, he may not even walk in front of the borrower for it may remind him of the loan which is due.34

Taking Collateral

  1. Although one may ask for a collateral, one should provide a loan even if the borrower has no collateral to give.35
  2. If one wishes to keep the collateral as a repayment of a loan, it first must be appraised by a Beit Din (rabbinic court). It must be then sold to a third party, and the lender may keep the money up to the amount of his loan. Thirty days must pass after the due date of the loan before this process may take place.36
  3. If one wishes to circumvent this process, he should make a condition at the time of the loan that if the loan is not paid on time, the collateral will be considered the property of the lender retroactively from the time of the issuing of the loan.37
FOOTNOTES
1.

14:7-8.

2.

23:24. Our Sages interpret the word im in this verse to mean "when" rather than "if," its usual meaning. See Rashi on this verse, quoting Mechilta.

3.

See Alter Rebbe's Shulchan Aruch, Choshen Mishpat, Laws of Loans, Halachah 1.

4.

Pe'ah 1:1.

5.

Shabbat 63a.

6.

See Maimonides, first chapter of the Laws of Loans.

7.

Taz on Choshen Mishpat 97 d.h. Betur.

8.

Proverbs 21:21.

9.

See Ahavat Chessed, Second Section, Chapter 16, where he speaks at length about this issue.

10.

Alter Rebbe's Shulchan Aruch ibid. from Talmud, Bava Metziah 71a.

11.

Gittin 61a.

12.

See Deut. 23:20-21.

13.

Talmud, Sukkah 49b.

14.

Talmud, Bava Metziah 71a.

15.

Commentaries on Pe'ah ibid., and see Alter Rebbe's Shulchan Aruch ibid. 1 in parentheses. But see Ahavat Chessed 1:4.

16.

Ahavat Chessed ibid. 5.

17.

Ahavat Chessed ibid. 2.

18.

Alter Rebbe's Shulchan Aruch ibid. 6.

19.

Ibid.

20.

Taz on Choshen Mishpat 97.

21.

Alter Rebbe's Shulchan Aruch, ibid. 5, with Imrei Yaakov there.

22.

But see Ketzot Hachoshen 104:2 that some say that the obligation to repay only takes effect when the lender asks for repayment.

23.

Proverbs 3:28.

24.

Code of Jewish Law, Choshen Mishpat 97:23.

25.

Ibid.

26.

Teshuvat Harosh 78:2.

27.

Psalms 37:21.

28.

Alter Rebbe's Shulchan Aruch, ibid. 5.

29.

Pitchei Choshen, Laws of Loans, Chapter 2, note 35.

30.

Alter Rebbe's Shulchan Aruch, ibid.

31.

Ibid.

32.

Ibid.

33.

Alter Rebbe's Shulchan Aruch, ibid., from Maimonides ibid. 1:2.

34.

Talmud, Bava Metzia 75b.

35.

Alter Rebbe's Shulchan Aruch, ibid.

36.

Alter Rebbe's Shulchan Aruch, ibid. 17-19.

37.

Ibid 24.

Rabbi Aryeh Citron was educated in Chabad yeshivahs in Los Angeles, New York, Israel and Australia. He was the Rosh Kollel of The Shul of Bal Harbour, Florida, and is now an adult Torah teacher in Surfside, Florida. He teaches classes on Talmud, Chassidism, Jewish history and contemporary Jewish law.
© Copyright, all rights reserved. If you enjoyed this article, we encourage you to distribute it further, provided that you comply with Chabad.org's copyright policy.
E-mail
1000 characters remaining
Email me when new comments are posted.
Sort By:
Discussion (7)
July 18, 2011
how easy it is to find someone?
I am looking for a co-signer to sign a student loan, but could not find anything within the Jewish community.

any ideas?
Anonymous
New York, NY
January 4, 2011
Correction to my previous post, Year of Jubilee
Based on the additional information that the person obtained bankruptcy protection, it is most likely not possible to sue in a secular court. This is based on the principle adopted into law that a person with great debts should be allowed a chance to start over without having to spend the rest of his or her life under the debt obligation. There are exceptions. For example, in the USA, a person who files for bankruptcy may be able to eliminate some credit card debts, but continues to owe all student loans and child support obligations. Since the exact rules vary from country to the country, so I cannot advise you on your situation.

Interestingly, there is analog to bankruptcy protection in ancient Judaism. Every "50th" year (which means every 49 years, because they started counted with the previous time being the "1st" year; 50-1=49), there was a year of Jubillee, when slaves were freed, purchased farmland (but not houses in cities) was returned to its original owner, etc.
Anonymous
Camarillo, CA
January 4, 2011
Refund of Fund Borrowed By Jewish Friend 35 YrsAgo
Comment on Aryeh Citron's Comment:

In A Manner It was A Loan As This Jewish Friend Took Unilateral and sudden decision to use the trust fund left him for onward transmission to the rightful owner but in stead of doing it suddenly he took the liberty of using it for his Venture or mis-venture in a Central American Country with out any kind of permission or consent from the persons concerned at any stage, eventually took the shelter of Bankruptcy / Insolvency to carry on his affairs.Now with stroke of good luck he has managed to recoup his original
investment of approximately Half Million sort of multiplied by ten times. Now he should be enlighten enough to square up the financial mistake incurred by him but he seems to be shying away with blurred lure of money in hand. 100,000 is definitely not
his which he made as part of his investment in Central America. He should at least return the Original Sum if not the Interest or Profits out or it. In Simple Interest Calculations of original.
Anonymous
Mumbai, India
January 2, 2011
Refund
I concur with the anonymous responder of California. Well said. Thank you.
Whether or not intrest need be paid in this case (if the one who gave the loan is not Jewish) depends on the specifications given at the time if the loan.
Aryeh Citron (author)
Surfside, Fl
January 2, 2011
Re: Refund of Fund Borrowed By "Friend" in Mumbai
The ethics and code of the Jewish religion prohibit misuse of entrusted funds and require repayment of loans if possible.

The ethics of friendship and the laws enacted by the government also prohibit misuse of entrusted funds and require repayment of loans if possible.

The laws, codes, and ethics do not allow what this "friend" did.

The problem here is not with the religion or the code: they clearly say that the funds must be used only as allowed and must be repaid.

The problem is that the borrower violated the religion and the code (and secular law).

You could ask a Beit Din to rule on your dispute. If he is now following the religion, he might comply with the ruling. Consult a Rabbi.

In some places, the "statute of limitations" does not apply when a borrower leaves the country. You might also be able to sue in civil court. This has the advantage that it can be enforced (in some countries) with wage garnishments, police actions, or other methods. Consult a lawyer.
Anonymous
Camarillo, CA
January 2, 2011
Refund of Fund Borrowed By Jewish Friend 35 YrsAgo
A Jewish Friend Took USD100,000 Left In Friendly Trust For Onward Payment For Specific Over Due Payment But He Suddenly Used It For His personal Use/Investment In Central America Without Any Consent & Permission From Person Who Left The Funds with him. Now This Jewish Friend Was Lucky Enough to Recoup His investment in Central America About 10 Times of his original funds, but now seems to shying away to return the original sum of USD100,000
itself even after getting more than his dues.
What are the Jewish Religion & Code of Conduct in such matters regarding using trust funds without permission and its return when he became fully capable once again and how to make him see his moral and ethical responsibility towards what he did 30 Plus Years Ago and how with God's Grace he seems to be in a position to correct the gross mistake incurred by him.
Anonymous
Mumbai, India
August 5, 2010
Possible exception
Loaning money to a person who will have great difficulty paying back the money, for example, issuing "subprime mortgages", does not seem like a mitzvah to me. There are even reports of lenders in the U.S. loaning to borrowers who the lenders have determined (before making the loans) will be unable to pay the loans on time, because the lenders want to charge late fees and make more money that pay than from loan repayment. Loaning money to someone with the intent to impose a penalty, while withholding knowledge from the borrower about the true total cost of the loan (including fees), is not a mitzvah.
Stephen Weinstein
Camarillo, CA