Choshen Mishpat 97
When a Jew needs money, the lender has the opportunity to be truly helpful, while running the risk of violating the Torah in more than one way.
Lending Is a Form of Charity
AH begins the siman (Choshen Mishpat 97) with Shabbat 63a, where the Gemara said lending money is better than giving it as a gift, because it preserves the recipient’s dignity, gets the person back on his/her feet without the embarrassment or pressure of having to rely on handouts. Even better than a loan—although loans are our topic—is to invest with the other, take a split of the profits from whatever venture.
The charitable framework means many of the standards of charity carry over when choosing to whom to loan: relatives first, the poor of one’s city have greater call on loans than those from outside. As opposed to charity, though, a wealthy person might need a loan [by “need,” he means more than they want credit to expand their business empire, but that’s a digression too far for her], and that, too, will be a mitzvah. As is speaking with those in need, giving advice, part of gemilut chasadim, doing kindnesses for others.
Devarim 15;9 calls it beliya’al, base or unworthy, to refuse to lend someone in need. A starting point, the obligation to lend, both a charity and a kindness.
Treat Your Brethren Well
Once the money is in the borrower’s hands, both parties incur new obligations. Se’if two quotes Shemot 22;24, the lender may not act like a nosheh, a loan shark, pressuring for repayment when he knows the borrower does not have the money. “Pressure” in this context includes making sure the borrower sees the lender, an implicit reminder of the loan hanging over his head.
In se’if three, AH reminds us of how the borrower can mishandle the situation, based on Mishlei 3;28, do not force someone to come back the next day to secure money owed him/her, when the borrower already has it. Included in that, AH says one may not take a loan when s/he doesn’t need it [the definition of need can be subjective; I remember my father, a”h, telling of a friend who extended himself to lend money, only to find the other person had plenty of investments he chose not to sell, instead asked this guy.]
Along the same lines, Tehillim 37;21 denigrates an evil borrower who does not pay, and recommends a lender stay away from lending to such a person, since s/he the lender will be put into the position of having to extract payment, forced to act like a nosheh. Better not to get into the quagmire at all.
[A beautiful example of the challenges of halachah in practice. We are required to lend fellow Jews, one of the highest versions of tzedakah, unless we know they are the type to renege, putting us at risk of acting too aggressively to recover our money.]
Collateral Taken Later
Collateral taken at the time of the loan presents many fewer problems than when the lender later wants security for the collection of the loan. In that latter case, when the collateral is taken when the loan is due, se’if four reminds the court they cannot insist on the lender’s compassion, to give the borrower more time. The law is the law; perhaps other people can have a conversation with the lender, but the court’s job is to rule on and enforce the law. No rachamim in din, no warping the law to be kinder.
Sometimes, the lender might take collateral after the loan but before it is due, if s/he has convincing reason to believe the borrower is trying to avoid payment (is selling off assets,
