Yaakov had just purchased a home. He maxed out his available home equity for the mortgage, but wanted to do additional renovations, which amounted to $50,000. The bank, however, refused to lend him the additional amount, despite his good credit standing.
Yaakov turned to his relative, Shlomo. “Are you willing to let me use your available home equity line?” he asked. “I’ll pay you each month whatever comes off for the loan, including your interest to the bank. You know that I’m good for the money!”
“In principle, I’m willing to do this,” replied Shimon. “But there may be an issue of ribbis involved.”
“What ribbis is there?” asked Yaakov. “You’re not gaining anything on this deal!”
“You’re not the first person to ask about this,” said Shlomo. “Occasionally people ask me about using the credit line on my credit card and offer to pay the interest until the credit is paid off.
“I asked a Rav,” continued Shlomo, “and was told that although I can charge immediate fees to the other person, I need to make a heter iska for the subsequent interest payments that he covers.”
“But why should we need a heter iska?” asked Yaakov. “I’m just covering what you pay to the bank.”
“Still, I’m giving you $50,000,” replied Shlomo. “Over the years, you’ll pay back over $60,000, so you are returning more than I gave you.”
“But the extra I’m paying is not for you,” argued Yaakov. “You’re taking the loan for me, so that, effectively, I’m borrowing the money from the bank.”
“That may be,” replied Shlomo. “Remember, though, that I’m signed as the borrower in the loan documents of the bank.”
“Let’s check with Rabbi Dayan,” Yaakov said. The two met with Rabbi Dayan. Yaakov asked:
“Can Shlomo take out a loan for me?”
“There is a difference between banks worldwide, which are mostly non-Jewish owned, and banks in Israel, which are Jewish-owned and operate with a heter iska,” replied Rabbi Dayan.
“The Gemara (B.M. 71b) teaches that a Jew who borrowed money from a non-Jew and wants to lend it to another Jew cannot charge him the interest that he pays the non-Jew. Even if the non-Jew said to give over the money, the second loan is viewed as between the two Jews, because there is no concept of agency regarding a non-Jew, unless initially arranged that the non-Jew collect only from the other Jew (Y.D. 168/9:1,2,17; Taz Y.D. 170:3).
“Similarly, in our case, if Shlomo takes a loan from the bank, he is considered their borrower; he is liable to them. When he gives the money to you, he is considered your lender. Therefore, a heter iska is needed between you two (Bris Yehuda 6:20-23; Toras Ribbis 21:22).
“The same is true if a person took a loan from a bank in Israel and afterwards decided to give the money to another Jew and have him cover the monthly payments, which total more than the current principal (The Laws of Ribbis 13:36-37, 17:17-21).
“However, if the loan was initially intended for the second person, and the bank has a heter iska, some poskim rule that the heter iska can extend to the second loan. Because the bank and the two borrowers are Jewish, the borrower is like an agent of the second person; just as he received the money with an iska arrangement, he handed it to him.
“It is still preferable to draft a separate heter iska between the two people, or at least state explicitly that their arrangement follows the heter iska of the bank,” concluded Rabbi Dayan. “However, poskim are lenient even if they did not address the issue explicitly, and even if the second borrower did not know of the heter iska (Maharsham 1:20, 7:63; Toras Ribbis 17:14).”
Verdict: A person who takes a loan from a non-Jew to give to another Jew must draft a heter iska. However, if he initially took the loan for him with a heter iska, some poskim allow him to give it to another Jew without another heter iska.
