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| Lending money on interest is one of the more severe prohibitions in the torah. <ref> The Gemara BM 71a says that one who lends with interest becomes poor and never recovers. The Rambam Hilchot Malveh Viloveh 4:2 delineates six biblical prohibitions which could potentially be violated in any particular loan transaction. Ramban Sefer Hamitzvot Shoresh 6 adds a 7th. </ref> The lender, the borrower, the guarantor, the witnesses, and even the scribe violate when engaging in an interest-bearing loan. <ref> Mishna Bava Metzia 75b. Shulchan Aruch YD 160:1</ref>
| | The laws of interest are one of the most complex and relevant laws in today's economy and even in everyday life. See the numerous pages below for the details of arranging loans in a permitted fashion. |
| ==Basics==
| | *[[Categories of Ribbit]]: This page includes |
| # In any case where a person owes a debt to another Jew whether it is because he borrowed money or because he hired him and owes him or because he rented something and didn’t pay yet, it is forbidden to pay more than the actual debt because of the prohibition of taking interest. <Ref>S”A Y”D 176:6, Rama Y”D 161:1, The gemara Bava Metsia 63b explains that as long as one is paying extra to be able to hold the money for longer, it would be a violation of this prohibition. </ref>
| | **the definitions of biblical and rabbinic interest, |
| # It is prohibited to lend with interest even if the borrower is wealthy and willingly agrees to pay the interest. <ref> Shulchan Aruch YD 160:1,4. </ref> It is prohibited even in cases where it seems entirely fair such as reimbursing the lender for the interest he was earning while his money was in a non-Jewish bank. <ref> Iggerot Moshe YD 3:93 </ref>
| | **legal subterfuge sometimes which is permitted and sometimes forbidden, |
| # If neighbors have a good relationship and commonly borrow without being careful to return everything they borrow, then there is no prohibition of interest as the neighbors aren’t borrowing but rather gifting one another. <Ref> The Weekly Halachah Discussion (vol 2, pg 348) quoting The Laws of Interest (pg 35)</ref>However, if neighbors do not such a relationship then a neighbor who borrows a half a bag of sugar is borrowed only that amount may be returned unless the amount difference is insignificant (about which people don’t care) <Ref> The Weekly Halachah Discussion (vol 2, pg 348) quoting Brit Yehuda (Siman 17 note 6)</ref> or if one is unsure how much one borrowed one may return an amount to be sure the loan is repaid. <Ref> The Weekly Halachah Discussion (vol 2, pg 348) quoting Sh”t Minchat Yitzchak 9:88</ref>
| | **the laws of interest on rentals, |
| # It is permitted for someone to borrow another Jew's credit card to pay for a purchase and repay them the amount spent. Even if the purchaser receives points from the credit card company, that isn't considered interest since it doesn't come from the borrower. Additionally, the borrower may not the purchaser for any interest fees that the purchaser may incur if he pays late.<ref>[http://www.torah.org/advanced/weekly-halacha/5762/behar.html Rabbi Doniel Neustadt on torah.org] and [dinonline.org http://www.dinonline.org/2014/01/17/receiving-points-from-credit-card-loan/]</ref>
| | **whether it be renting real estate or or utensils, |
| ==Rabbinic Prohibition of Interest==
| | **interest for worker salaries, |
| # There are several different forms of interest that are prohibited only rabbinically. There are several practical differences if it is only rabbinic. For example, Rabbinic interest was not extended to charities. <ref> Shulchan Aruch and Rama YD 160:18 </ref> Additionally, one who receives biblical interest must return it but this does not apply to certain cases of rabbinic interest. <ref> Shulchan Aruch YD 161:2 </ref>
| | **lending objects, |
| ==Discounts==
| | **returning stolen money, |
| # Usually it is considered a rabbinic prohibition of taking interest to have a two tiered system in which the buyer could either pay a lower price now and receive the merchandise or can get the merchandise now and only pay later but at a higher price. <ref>Shulchan Aruch YD 173:7, The Laws of Ribbis p. 132, [https://www.yutorah.org/sidebar/lecture.cfm/900500/rabbi-hershel-schachter/dinei-ribbis/ Rav Hershel Schachter (Dinei Ribbis min 40)]</ref>
| | **interest with a loan of land or documents, |
| # It is common in some businesses to require a deposit when a customer places a sale to ensure that the seller follows through with the sale. It is permitted for the seller to charge a lower price to the buyer who makes a deposit since the seller’s intent in requiring a deposit isn’t to charge interest but to ensure that the sale takes place. <ref>The Laws of Ribbis p. 133</ref>
| | **forgiving interest, |
| # It is forbidden to pay a camp an early bird special or discounted price if you pay early.<ref>[https://www.yutorah.org/sidebar/lecture.cfm/900500/rabbi-hershel-schachter/dinei-ribbis/ Rav Hershel Schachter (Dinei Ribbis approx min 40)]</ref>
| | **ribbit for [[pikuach nefesh]], |
| # It is forbidden to pay for a sefer in advance before the printer published the sefer.<ref>[https://www.yutorah.org/sidebar/lecture.cfm/900500/rabbi-hershel-schachter/dinei-ribbis/ Rav Hershel Schachter (Dinei Ribbis approx min 40)]</ref>
| | **taking interest temporarily, |
| # Using advanced discounted payments for a yeshiva or non-profit tzedaka organization is permitted since this is only a rabbinic form of interest.<ref>[https://www.yutorah.org/sidebar/lecture.cfm/900500/rabbi-hershel-schachter/dinei-ribbis/ Rav Hershel Schachter (Dinei Ribbis approx min 40)]</ref>
| | **and giving interest to benefit the lender. |
| | *[[Interest with Non-Jews]]: This page includes |
| | **the laws of interest with a non-Jew, convert, non-religious Jew, |
| | **lending between several parties some of which are Jewish and some non-Jewish, |
| | **Jewish agent for interest deals, debt equity, |
| | **managing someone else's money, |
| | **as well as guarantors and co-signers. |
| | *[[When Is It Permitted to Benefit the Lender]]: This page covers |
| | **the topics of gifts or favors from the borrower to the lender, |
| | **whether it be monetary or non-monetary, or even mitzvah opportunities. |
| | **It also relates to a lender benefiting from a borrow's property, |
| | **hiring or giving business to the lender, |
| | **right of first refusal, |
| | **paying taxes, fees, or debt for the lender. |
| | **Payments to or from a third party are a separate discussion on this page as well. |
| | *[[Buying on Credit]]: This page discusses all of the details of |
| | **discounts for buying on credit such as subscriptions, early bird specials, or prepayments, |
| | **benefiting the seller, |
| | **contracts with a delivery company, |
| | **return policies, |
| | **and after the fact transactions established with interest. |
| | *[[Guaranteed Low Prices]]: This page deals with the topic of |
| | **paying for goods with a delayed delivery, |
| | **future contracts of commodities, |
| | **and a purchase of a service in advance without assuming risk. |
| | *[[Penalty Clauses]]: This page is dedicated to |
| | **penalties and late fees those which are permitted and those which are forbidden as interest. |
| | *[[Borrowing Commodities]]: This page deals with |
| | **borrowing commodities. |
| | **such as if you want to borrow a bag of flour or dozen eggs from your neighbor. |
| | **Lending commodities as part of a work contract is also discussed here. |
| | *[[Returning Interest That Was Wrongly Collected]]: |
| | **What to do with interest that was collected by accident or intentionally and now needs to be returned. |
| | **Biblical vs Rabbinic interest |
| | *[[Corporations and Partnerships]]: |
| | **A classic iska with all of the terms and conditions are documented here. |
| | *[[Financial Tools and Interest]]: |
| | **Stocks, |
| | **Merchant cash advance, |
| | **Annuity, |
| | **Selling a loan |
| | *[[Foreign Currency and Interest]] |
| | **Lending or Trading Foreign Currency |
| | **Purchasing a Commodity with One Currency and Repaying with Another |
| | *[[Common Everyday Cases of Interest]]: Some of the common questions dealt with on this page include: |
| | **Borrowing someone's credit card. |
| | **Keeping the Change when Repaying, |
| | **Selling a Check, |
| | **Exchanging Favors, |
| | **Family Members Lending, |
| | **Loans of Small Amounts, |
| | **Early Bird Specials, |
| | **Car Loans, and |
| | **Opening an Account at an Israeli Bank |
| | *[[Heter Iska]] |
| | **In order to make any loan with interest, which is standard in today's economy, a person needs to sign a heter iska to effectively change the contract from a loan into a partial or complete business deal. The halachot are complex and must be done with an official heter iska documents or reviewed by a rabbi. |
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| ==Partnership of Jews and non-Jews==
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| # It is forbidden to charge or take interest from an individual Jew or group of Jews. Some poskim allow borrowing or lending on interest to a partnership of Jews and non-Jews if the non-Jews comprise at least half of the group to which one is lending or from which one is borrowing.<ref> The Shoel V’Nishal (Mahudra Kama 3:31) writes to Rav Shlomo Ganzfried, author of the Kitzur Shulchan Aruch, that he held that it was permitted to borrow or lend with interest from a partnership between Jews and non-Jews. He thought that since the partnership signs under the title of an entity and not individuals it is permitted according to Rashi and those who hold that lending on interest through a messenger is permitted. Further, even according to those who argue with Rashi, he thought that it was permitted if there are non-Jews in the group so that the Jews can say that they only profited from the non-Jewish borrowers and not the Jewish borrowers. Rav Yitzchak Schmelkes in Beis Yitzchak (v. 2 Kuntres Acharon no. 32) qualifies the Shoel V’nishal’s permit to cases where there are a majority or at least half non-Jews. Mishneh Halachot 6:145 and 13:130 permits borrowing or lending from banks that have a minority of Jewish shareholders because the Jewish shareholders don’t have a say in how the bank runs. The Maharam Shik YD 158 argues with the Shoel V’nishal’s logic; see there for his leniency with other conditions. </ref>
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| ==Corporations==
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| # Some poskim say that it is permitted to lend or borrow on interest from a corporation even if it is owned by Jews because halacha views the corporation as a dummy entity that isn’t Jewish. Others say that it is only permitted to lend on interest from the corporation but not borrow on interest from them, while others still forbid both borrowing and lending with interest from a Jewish corporation.<ref> Igrot Moshe YD 2:63 thought that the prohibition of borrowing with interest does not apply to a corporation. Since no one person has personal liability for the loan, the corporation may pay interest. He based this contention on the opinion of Rabbenu Tam (cited by Tosfot Ketubot 85b) who says that there are two types of indebtedness: a lien on one’s property and a personal one. Rabbenu Tam holds that if a person forgives the borrower and relinquishes the personal lien even if there still is a property lien that was sold to another person, that property lien automatically falls apart. Accordingly, one may receive interest from a bank or invest in bonds or stocks of a corporation, though one still would not be allowed to borrow from a corporation.<br />
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| Maharshag YD 3 brought a proof that there is no biblical ribbit to charge a corporation interest from the Gemara Gittin 30a that permits giving money in advance to a kohen so that the next time a person has a crop he can take off Trumah, sell it to kohanim, and then the proceeds are effectively given to the kohen and used to pay off part of the debt so that the owner can keep the proceeds of the sale. The gemara explains that even though there is a rabbinic prohibition of interest to pay in advance for food that hasn’t grown and there’s no market price, here it is permitted since the kohen borrower has no real obligation to pay out of pocket according to the original stipulations. The Chelkat Yakov YD 66 grapples with the Rogachover and Maharshag but ultimately says that it is forbidden rabbinically even though there is a good logic to permit it. Rav Zalman Nechemya Goldberg (Shiurei Ribbit p. 8) questioned the proof of the Maharshag because the risk factor that the debtors won’t pay the bank isn’t as great as the risk that a field gets ruined. Minchat Shlomo 1:28 argues with Rav Moshe and isn’t lenient in either direction.
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| Lastly, Rav J. David Bleich in Netivot HaHalacha v. 2 p. 191-4 disagrees with Rav Moshe that it is impossible to have a shiybud nechasim without shiybud haguf. If there exists a shiybud it also applies to the guf even though there is some external conditions which make it impossible to collect from the shiybud haguf.</ref>
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| ==Non-Financial Benefit==
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| # It’s forbidden for the borrower to do a favor to the lender if he would not have done it otherwise (if not for the loan). Even if the borrower would have done a certain favor if not for the loan, the borrower may not do that favor in public unless they have a good relationship and the borrower has done public favors for the lender in the past.<Ref>The Weekly Halachah Discussion (vol 2, pg 346) </ref>
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| # While some poskim prohibit the borrower from thanking the lender for the loan under the prohibition of ribbit devarim <Ref> Iggerot Moshe YD 1:80 </ref>, other poskim are lenient and allow a simple thank you. <ref> Rav Shlomo Zalman Auerbach in Minchat Shlomo 1:27 </ref>
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| # There’s no prohibition to do a non-financial favor after the loan was paid up. <Ref> Birkei Yosef Y”D 160:11, The Weekly Halachah Discussion (vol 2, pg 348), Malveh Hashem (vol 1, 8:30) </ref>
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| ==Heter Iska==
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| <p class="indent">Because of the difficulty of abiding by all the details of loaning without interest, there’s an institution which is a contract set up by the Rabbis to conduct a business loan without violating the Torah prohibition of interest. This is only a general overview and not a procedure to be done without consulting an Orthodox Rabbi.</p>
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| <p class="indent">The Heter Iska splits the money in two, half (or a percentage) is a money deposit and half is a loan. The borrower may use the half which is a money deposit for business but as the deposit is considered the property of its owner wherever it may be, the profit that the borrower makes belongs to the lender. However, a loan is considered the money of the borrower and the profits belong to the borrower, who is then only obligated to return the capital without interest. </p>
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| <p class="indent">One condition of the agreement is that the borrower isn’t trusted to say that he lost money unless he proves it with acceptable witnesses and he isn’t trusted to say that he didn’t profit unless he makes a Shevuah (biblical oath) that he didn’t profit. Another condition is that if the borrower pays the agreed amount (above the original capital) he doesn’t need to prove that he didn’t make any more money. Therefore, at the end of term, the receiver returns the half which is a loan (while keeping the profit made from that half) and returns the deposit along with the profit he made from that half up to the amount agreed upon (and if he didn’t profit that amount unless he proves it he must still pay the agreed upon amount, and if he profited more, he’s exempt from paying more). </p>
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| <p class="indent">There are many other conditions and one must consult with a reliable orthodox rabbi regarding each situation and how to draw up a Heter Iska. <ref> Kitzur Shulchan Aruch 66:1-6. See Ribit Halacha LeMaseh chapter 20. One can see this [http://www.bethdin.org/docs/PDF15-Shtar_Iska.pdf shtar isko] on the website of the Beth Din of America </ref></p>
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| ==Links== | | ==Links== |
| # [http://www.yutorah.org/lectures/lecture.cfm/826799/Rabbi_Hershel_Schachter/Ribbis Ribbis] by Rabbi Hershel Schachter
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| # [http://www.yutorah.org/lectures/lecture.cfm/773692/Rabbi_Yona_Reiss/Contemporary_Issues_in_Hilchos_Ribbis Contemporary Issues in Hilchos Ribbis] by Rabbi Yona Reiss
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| ==Sources==
| | #[http://www.yutorah.org/lectures/lecture.cfm/826799/Rabbi_Hershel_Schachter/Ribbis Ribbis] by Rabbi Hershel Schachter |
| <references/>
| | #[http://www.yutorah.org/lectures/lecture.cfm/773692/Rabbi_Yona_Reiss/Contemporary_Issues_in_Hilchos_Ribbis Contemporary Issues in Hilchos Ribbis] by Rabbi Yona Reiss |
| [[Category:Between Man And His Fellow]] | |
