Monday, April 12, 2010

Lending /borrowing money with interest

28th of Nisan, 5770 (Today is the 13th day of the Omer)

It is forbidden for a Jew to lend or borrow with interest (“Ribbit”). Not only is it forbidden to lend/borrow with monetary interest, but any kind of interest is forbidden—even if it is through something other than money or even when not done at the moment of the loan. It is forbidden to send gifts to somebody, with the intention that this person will “return the favor” by agreeing to lend some money. The gifts would be a form of Ribbit in advance.

Illustration: Jonah is about to start a new business. A month from now, he will need to be lent $10,000. He starts treating his friend Danny exceedingly well, invites him out to lunch a few times, gets him gifts, all so that a month from now—when Jonah asks for the loan—Danny will agree to it. This is forbidden. The gifts are a kind of “Ribbit” in advance.
Similarly, it is forbidden for a borrower to give Ribbit to his lender, retroactively, after the loan.

Illustration: Danny lent Jonah the $10,000 he needed. Jonah is not allowed to start being “extra nice” towards Danny because of this loan, and buy him presents and invite him out for lunch.
The main idea behind this is that lending money interest-free is a Mitzva. When a lender lends money interest-free he is doing a favor to himself, by following a precept from the Tora.

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Note: the laws of “Ribbit” are very complex, especially in today’s corporate world of sophisticated financial and legal structures. Ours is a basic overview of the Halakha as found in Maimonides’s Mishne Tora and in Shulchan ‘Arukh. Please consult your rabbi with any practical questions (Halakha leMa’ase).