The Debtor and the Lender; Who Wins?

Borrowing money is a hassle and incurs additional costs than the amount borrowed, correct? Not always. Enter the Jewish world and you will find a plethora of interest free loans. The reason? Torah law, the bible of the Jews, forbids lending on interest. Torah law specifically states “when lending money within the Jewish community, to the poor, the lender shall not be to him as a creditor, neither shall the lender impose upon the debtor any interest”.

Any debtor out there is aware that loans that incur interest are a growing expense like the electric bill that keeps rising. The same is true for loans; the interest incurred weighs down pockets and depletes bank accounts. The money owed grows fast, huge and is potent. At the end of the day, David, the debtor, has laid out more cash for his new Honda than the initial price of his beauty.

Yes, loans can bite. The Torah word for interest means bite. A loan can result in the debtor incurring a great wound in his life as the money swells, just like that electric that keeps on eating away the money. In a similar vein, interest on loans can seem like a small percentage, but the money owed swells fast.

That is why the Torah has forbidden lending on interest. Not only is the lender forbidden to demand interest from the debtor, the debtor is also tied to this law. When David is strapped for cash and has difficulty finding a lender that will lend him money (surely, because he was negligent in repaying debts in the past), one would think that he can encourage fellow Jews to lend him money by tantalizing them with high percentage interest points. But no, contrary to intuitive thinking, it is forbidden by Torah law for David to pay interest to the individual who lends him money.

Borrowing money interest free is not as easy as one two three. The borrower usually has to write up a contract and bring in two witnesses that will agree to repay the loan if he cannot. However, both the contract writer and the witnesses are as culpable for usury as the debtor and lender. Neither of them may try to get money out of the deal. This expresses the strictness with which God forbids lending on interest.

Now, here's a problem. If David needs money and cannot get a credit card for obvious reasons we won't mention, he may innovate to borrow his friend's credit card or to ask his friend to add him as an authorized user on the credit card. After all, his friend has a good credit rating. But what if David does not pay the credit card on time and incurs interest? His friend may not charge David the interest. Since David borrowed the money from his friend's credit card it is considered as if his friend gave him the loan. From where his friend got the loan from to give to David is irrelevant. Since the loan came from his friend any credit card interest paid on the loan is considered as if it is paid to his friend regardless of where the interest will end up. This is a violation of Jewish law. Better for David's friend to help David improve his credit rating and get his own credit card.

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