Heshy Rubin finished reviewing his financial summary. “The economic downturn took its toll on us,” he thought, “but not nearly as much as it affected others.”
Recently he began getting many requests for loans from people affected by the downturn. His brother approached him and asked, “Can you lend me $5,000 towards Yoni’s bar mitzvah?”
The neighbor down the block, who was laid off almost two years ago, approached him confidentially, “We’ve depleted our savings. Can you lend us $10,000 to cover our bills for the coming months?”
In addition, a business associate approached him. “Heshy, I’m at a crisis point with my cash-flow,” he pleaded. “The bank is being extremely tight with my credit line. Without $25,000 cash, I won’t be able to restock for the coming season.”
Heshy’s head was swirling with the many new requests. Is it better to give more charity or loans? How much should I lend? To whom? What risks should I take?
When he posed his questions to Rabbi Dayan, the latter opened the Shulchan Aruch and invited Heshy to read: “It is a positive commandment to lend to the Jewish poor; it is a mitzvah greater than charity. A person’s poor relative takes precedence over other poor people, and the poor people of his city take precedence over the poor of other cities. It is even a mitzvah to lend a rich person who needs to borrow for the moment, to benefit him with words and to give him proper advice.” [Choshen Mishpat 97:1]
Rabbi Dayan then explained: “Loaning money is greater than giving charity because it protects the person’s dignity.” [Prisha, Choshen Mishpat 97:1]
“The Chofetz Chaim dedicated his work Ahavas Chesed to the mitzvah of gemilus chasadim,” continued Rabbi Dayan. “Most of it deals with the mitzvah of granting interest-free loans. He addresses the question: How much is a person obligated to lend, and for how long? He concludes that each person should lend according to his ability – his available assets, the time-frame of the projected expenditures, and the financial needs of the borrower. [Ahavas Chesed 1:4-7]
“If you do not have confidence in the borrower,” Rabbi Dayan continued, “you are entitled to request means to guarantee repayment of the loan, through collateral, post-dated checks, or co-signers. If the borrower does not provide sufficient guarantees, you are not obligated to lend him money, although you should not be overly cautious.
“If you expect that the borrower won’t repay you, it’s better not to lend than to lend and constantly pressure him to pay when he is unable to. In this situation, it is best to give the money as charity or to stipulate that if the borrower does not repay the money, it will count towards your charity requirement. [Ahavas Chesed 1:9; Rema, Yoreh De’ah 247:5].
“Although your relatives and neighbors come first, a poor person who provides guarantees takes priority over a wealthy relative momentarily in need. There is also an extra mitzvah to lend someone who needs a loan to keep his business from faltering. [Ahavas Chesed 6:1; II, ch. 21]
“You do not have to liquidate assets in order to grant a loan. However, if money is readily available in a checking, savings, or money market account, there is a mitzvah to lend even if it is earning a small percentage [ibid., 1:12; 5:5]. If you are concerned about the lost percentage or the erosion of your money through inflation, it is better to lend at a percentage with a heter iska than not to lend at all. [Bris Yehuda 40(1)]