In order to obtain money, along with the facilities offered by specialised institutions (banks, credit unions, mutual assistance services), many people resort to a series of ad-hoc financial relations, known as “personal loans”.
The way they are carried out is quite diverse, from simple agreements “sealed” with a handshake to full-fledged contracts, signed in the presence of witnesses, with insurance guarantees.
Problems begin to arise, especially in the case of less formal relations, with the faulty development of the loan agreement—in other words, when one of the parties does not comply with the obligations acknowledged or assumed by the initial agreement. The Civil Code provides a number of relevant regulations, but only for those loans recorded in the form of a contract.
However, the initiation and development of lending relationships also involves a number of ethical and moral-spiritual components, which is why, in an attempt to clarify some contentious issues regarding the subject, we have turned to the teachings of Scripture, the divine norm to which any Christian should relate.
Yes, or no? The loan as a “good deed”
If we are in the position of the creditor, the biblical text is very clear about the appropriateness of lending: “Give to the one who asks you, and do not turn away from the one who wants to borrow from you” (Matthew 5:42). The Saviour’s words only echo the divine provisions conveyed through Moses, after which the people of Israel were to be guided: “Rather, be open handed and freely lend them whatever they need” (Deuteronomy 15:8). The psalmist is even more explicit about the relationship between human character and the willingness to lend money: “They are always generous and lend freely; their children will be a blessing” (Psalm 37:26; 112:5).
Interestingly, as far as the borrower is concerned, the biblical text is much more cautious, both in the common context of the exhortations for providence and with regard to the relationship of dependence generated by the repayment commitment. In practice, the borrower is subordinated to the creditor throughout the existence of the debt, their individual freedom being thus restricted: “…the borrower is slave to the lender” (Proverbs 22:7).
Not only are the individual and social consequences of indebtedness considered, but also human limitations in predicting the future: “…you do not even know what will happen tomorrow” (James 4:14).
Who is my fellow? A false dilemma
As in the case of the controversy over the word “neighbour,” masterfully resolved by Jesus through the parable of the Good Samaritan, the excessive focus on the term “fellow,” which the Bible often describes as the recipient of the loan, is not constructive.
First, because in the context of the teachings transmitted through Moses to the chosen people, the term refers to any of the descendants of Jacob/Israel. Extrapolating to contemporary Christian reality, this notion applies to any of the “children of Abraham” (Galatians 3:7) or, more generally, to all who claim to come from the “one God and Father of all” (Ephesians 4:6).
Second, the emphasis is not on the word “fellow,” but on the attributes “poor” and “unable to support themselves.” Therefore, one does not appeal to fraternal feelings, but to mercy and generosity. Even in terms of interest, which we will discuss below, the treatment was non-discriminatory, with the term “fellow” referring to any beneficiary of support, even “a foreigner and stranger” (Leviticus 25:36).
With or without interest?
Comments on whether or not to apply terms of interest are based on the distinction the Bible makes: “You may charge a foreigner interest, but not a fellow Israelite” (Deuteronomy 23:20).
In order to understand this difference correctly, it should be noted that the Hebrew economy, based on land cultivation and animal husbandry, had a rather low degree of monetization, with commodity-money relations being rather sporadic. As such, many of the loans referred to in Scripture were in kind (food, animals), emphasising once again their charitable nature.
For some of the neighbouring peoples, such as the Ishmaelites, the Midianites, and later the Phoenicians, the main occupation was trade, which involved significant amounts of money and commensurate earnings. As such, the loan to foreigners was a participation in their business, with the corresponding risks and profit. Moreover, Bible commentators note that in Deuteronomy 23:20 we are dealing with wording that is permissive, not normative, such as that of a loan between fellows.
Another text, the logic of which seems to be in favour of collecting interest, is found in the New Testament: “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest” (Matthew 25:27).
What the text refers to here is a financial investment, lower in return than the option to invest money “in trade”, but similar to today’s bank deposits. We are not talking about a significant gain, because, as a rule, the remuneration of deposits slightly exceeds the inflation rate and the deposit and withdrawal fees charged by banks.
I emphasise the poor performance of these banking services in view of the fact that the Bible disproves of “dishonest money,” stating that “whoever increases wealth by taking interest or profit from the poor amasses it for another, who will be kind to the poor” (Proverbs 13:11; 28:8).
Rejecting the idea of obtaining income from the interest of a borrowed amount without any effort or personal involvement, the biblical message appreciates that in this way one would act contrary to a natural right. In the original text, the difference between interest and usury does not concern the (excessive) level of the latter. Both Hebrew terms actually refer to interest: neshek “money interest for cash loans”; tarbith, “interest taken in kind”.
The reimbursement issue
As stated in the preamble to this article, personal loans do not, as a rule, have a commitment to be repaid, recorded as such. During college, this finding worried me to some extent, after I had lent a colleague some money and especially after some of her friends described her as a bad payer.
I consoled myself by saying that by risking 100 lei, I had done good to the person in question, while she was risking her reputation towards one of her last potential creditors. To my surprise, the loan was repaid to me, just a few days before the agreed deadline. I experienced a similar incident much later, with the difference that the amount was slightly higher, and the beneficiary of the loan—a distinguished lady—“forgot” to return it to me.
Scripture is very clear about the obligation to repay a loan: “The wicked borrow and do not repay” (Psalm 37:21), including the possibility of resorting to a “prison of debtors” (see Matthew 18:30). Even if it disapproves of the position of guarantor, it does not exclude the creditor’s right to take the necessary guarantees (“gage”, proving documents).
At the same time, civil regulations in early Jewish culture provided for the periodic cancellation of debts: “At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the Lord’s time for cancelling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you” (Deuteronomy 15:1-3).
We again notice the terms “fellow” and (in the broader context) “poor”, which leads us to the logical conclusion of an act of generosity, subsequent to the idea of charity as a motivation for the loan. Furthermore, a distinction is again made between the business loan (to “foreigners”), which did not benefit from this facility.
Such an approach suggests that it is desirable for the size of the loan not to exceed the level at which we would be willing to grant non-refundable financial aid.
If we are in the position of the debtor, non-compliance with the repayment commitment is assimilated to fraud (similar to contemporary criminal law). Beyond criminal, civil, or moral sanctions, as the case may be, such conduct is in complete disagreement with divine principles: “They make many promises, take false oaths and make agreements; therefore lawsuits spring up like poisonous weeds in a plowed field” (Hosea 10:4).
The Bible is not a finance handbook, and those who expect to find a solution to all cases in a field such as personal lending may be disappointed. However, it offers us more than that, namely a set of coherent principles, strongly anchored in our earthly existence, according to which we can decipher, without too much difficulty, the conduct that we must follow in all general life circumstances.
On this basis we differentiated the two economic categories defined by the same term, namely the charity loan and the (financial) investment loan. We tried to establish the essential parameters of each of them (interest, repayment commitment, guarantees), their advantages, and limits.
We invite the reader to continue on this road, turning biblical inspiration into a personal experience, a practice of communion with its Author, for a beautiful and clean life, according to the Pauline exhortation: “Whatever you do, work at it with all your heart, as working for the Lord, not for human masters” (Colossians 3:23).
Dan Constantinescu answers the questions generated by the situations in which we are asked for a financial loan. His clear perspective is one inspired by the Bible.