Taking Interest: Difference between revisions

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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. S"A YD 160:1</ref>
==Basics==
==Basics==
# 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 </ref>
# 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 BM 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>
# 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>
# 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>
==Rabbinic Prohibition of Interest==
# 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>
==Corporations==
# Rav Moshe Feinstein’s opinion <ref> recorded in Iggerot Moshe YD 2:63 </ref> is 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. Accordingly, one may receive interest from a bank or invest in bonds or stocks of a corporation, though you still would not be allowed to borrow from a corporation. Many other achronim questioned this logic of Rav Moshe. <ref> see for example Bris yehuda 7:note 66 </ref>
 
==Non-Financial Benefit==
# 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>
# 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>
# 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>
# 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>
# 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>
# 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>


==Heter Iska==
==Heter Iska==
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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>
<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>
<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>
<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>
<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 </ref></p>
<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>


==Sources==
==Sources==
<references/>
<references/>
[[Category:Between Man And His Fellow]]
[[Category:Between Man And His Fellow]]

Revision as of 23:11, 26 January 2015

Lending money on interest is one of the more severe prohibitions in the torah. [1] The lender, the borrower, the guarantor, the witnesses, and even the scribe violate when engaging in an interest-bearing loan. [2]

Basics

  1. 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. [3]
  2. It is prohibited to lend with interest even if the borrower is wealthy and willingly agrees to pay the interest. [4] 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. [5]
  3. 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. [6]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) [7] or if one is unsure how much one borrowed one may return an amount to be sure the loan is repaid. [8]

Rabbinic Prohibition of Interest

  1. 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. [9] Additionally, one who receives biblical interest must return it but this does not apply to certain cases of rabbinic interest. [10]

Corporations

  1. Rav Moshe Feinstein’s opinion [11] is 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. Accordingly, one may receive interest from a bank or invest in bonds or stocks of a corporation, though you still would not be allowed to borrow from a corporation. Many other achronim questioned this logic of Rav Moshe. [12]

Non-Financial Benefit

  1. 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.[13]
  2. While some poskim prohibit the borrower from thanking the lender for the loan under the prohibition of ribbit devarim [14], other poskim are lenient and allow a simple thank you. [15]
  3. There’s no prohibition to do a non-financial favor after the loan was paid up. [16]

Heter Iska

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.

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.

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).

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. [17]

Sources

  1. ↑ 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.
  2. ↑ Mishna Bava Metzia 75b. S"A YD 160:1
  3. ↑ S”A Y”D 176:6, Rama Y”D 161:1, The gemara BM 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.
  4. ↑ Shulchan Aruch YD 160:1,4.
  5. ↑ Iggerot Moshe YD 3:93
  6. ↑ The Weekly Halachah Discussion (vol 2, pg 348) quoting The Laws of Interest (pg 35)
  7. ↑ The Weekly Halachah Discussion (vol 2, pg 348) quoting Brit Yehuda (Siman 17 note 6)
  8. ↑ The Weekly Halachah Discussion (vol 2, pg 348) quoting Sh”t Minchat Yitzchak 9:88
  9. ↑ Shulchan Aruch and Rama YD 160:18
  10. ↑ Shulchan Aruch YD 161:2
  11. ↑ recorded in Iggerot Moshe YD 2:63
  12. ↑ see for example Bris yehuda 7:note 66
  13. ↑ The Weekly Halachah Discussion (vol 2, pg 346)
  14. ↑ Iggerot Moshe YD 1:80
  15. ↑ Rav Shlomo Zalman Auerbach in Minchat Shlomo 1:27
  16. ↑ Birkei Yosef Y”D 160:11, The Weekly Halachah Discussion (vol 2, pg 348), Malveh Hashem (vol 1, 8:30)
  17. ↑ Kitzur Shulchan Aruch 66:1-6. See Ribit Halacha LeMaseh chapter 20. One can see this shtar isko on the website of the Beth Din of America
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