LOAN

LOAN (Heb. הַלְוָאָה, halva'ah), a transaction in which a thing, usually money, is given by one person, called the malveh ("lender"), to another, called the loveh ("borrower"), for the latter's use and enjoyment, and in order that such thing or its equivalent be returned by the borrower at some later date. In halakhic literature the term halva'ah is often used to describe an obligation or debt (ḥov) in general – i.e., not necessarily one originating from a transaction of loan – and many of the halakhot applying to debt in the wide sense of this term apply to loan, and vice versa (see gulak , Yesodei, 2 (1922), 5f.; see also Obligation, Law of ). In this article loan is treated in the restricted sense of the term defined above -Oral Loan (Milveh be-al Peh) and Loan in Writing (Milveh bi-Shetar) A loan established orally is distinguished from one established in writing in two main respects: (1) in the former case the borrower's plea that he has repaid the loan is believed, whereas in the latter case such a plea by the borrower is not believed when the bond of indebtedness is in the lender's possession; (2) in the case of a loan in writing, the creditor has the right to levy on the debtor's nekhasim meshu'badim ("alienated and encumbered" assets, see lien ; Obligation, Law of), a right not available to him in the case of an oral loan. The term milveh be-al peh is apparently a post-talmudic creation, although the distinction between the two forms of loan was recognized as early as tannaitic times (Gulak, loc. cit.; Herzog, Instit, 1 (1936), 352). -Mitzvah of Lending The precept of lending to the poor of Israel is based on Exodus 22:24: "If thou lend money to any of my people that is poor by thee" (see mekh ., Mishpatim, s. 19), and is included in the enumeration of the mitzvot (Sefer ha-Mitzvot, Asayin no. 197; Semag, Asayin no. 93; Sefer ha-Ḥinnukh no. 66). Some scholars derived this precept from other biblical passages (She'iltot no. 114; Semak no. 248). The lender, if he apprehends that he may not be repaid, may make his loan conditional on the receipt of a pledge from the borrower (Tos. to BM 82b; Ahavat Ḥesed, 1:13). The merit of fulfilling this precept was lavishly extolled by the scholars – even beyond the act of charity (Shab. 63a). The duty was held to cover also a loan to a rich man in his hour of need (Sh. Ar., ḤM 97:1, Sma thereto, n. 1), but some scholars restricted its application to the case of a poor man only (Evenha-Ezer, Malveh ve-Loveh 1:1). In certain circumstances a person is prohibited from lending money to another. This is so if there are no witnesses to a loan (BM 75b), lest the borrower be tempted to deny his indebtedness or the lender forget that he gave the loan; it nevertheless became customary for a loan, even an oral one, to be given in the absence of witnesses, and the aḥaronim sought to explain the custom and reconcile it with the talmudic halakhah (Pilpula Ḥarifta to BM 75b; Resp. Ben Yehudah, 1:153). Similarly prohibited is a loan given to a poor man for the repayment of another debt, since – but for such loan – the creditor might come to his relief on account of his poverty (Tos. to Ḥag. 5a). -Nature of the Repayment Obligation The nature of the borrower's obligation to repay the loan was a matter of dispute among the amoraim. R. Papa took the view that the duty of repayment was no more than a mitzvah – just as it was a mitzvah for the lender to give a loan – whereas R. Huna b. Joshua held that repayment was a legal duty (Ket. 86a; BB 174a; Nov. Ritba, Kid. 13b; Resp. Mabit, vol. 1, no. 51; Semag, Asayin 93). It seems that, alongside the legal duty, R. Huna recognized also the existence of a religious duty to repay the debt (Resp. Ribash 484; M. Elon (see bibl.), 20f. and n. 44, 45; for an opinion that the duty was a mitzvah only, see Nov. Ramban BB 173b). Some scholars held this mitzvah to be of Pentateuchal origin (Ritba, loc. cit.; Mabit, loc. cit., Resp. Pithei Teshuvah, ḤM 97, n. 4), while others interpreted R. Papa's statement as relating only to an oral loan (Rashbam BB 174a). A borrower who fails to repay the loan is described as rasha ("wicked"; Ps. 37:21; Semag, Asayin no. 93; see also contract ; Obligation, Law of ). -Halva'ah and She'elah She'elah (loan for use and return) relates to "utensils" (kelim), and halva'ah (loan for consumption) to money or "produce" (perot). Utensils are things which are not counted by weight and measure, nor exchangeable one for the other; things which are counted and exchanged in this way are "produce" (Gulak, Yesodei, vol. 1, p. 95; vol. 2, pp. 20, 171). The sho'el (borrower for use and return) must return the subject matter of the loan in specie, whereas the loveh need not do so. Unless otherwise stipulated, a loan is for consumption, and the borrower will only be liable for payment of the equivalent in produce or other property (see also shomerim ). -Establishment of Loan A loan transaction is concluded upon handing over of the money (or "produce") to the borrower. In post-talmudic times the opinion was advanced that a contract of loan might be established upon performance of a formal kinyan alone (see acquisition ), without handing over of the money, and that thereupon the borrower would become obliged to repay the money (Tur, ḤM 39:19 and Beit Yosef ad loc.); however, this opinion was not accepted by scholars (Beit Yosef loc. cit.; ḤM 89:17). Once the money of the loan has been given to the borrower, the lender will no longer have any right to retract and demand its return, even if it is still intact in specie (Baḥ, ḤM 39:19; Siftei Kohen, ḤM 39, n. 49). Where the lender has undertaken to give a loan and the borrower has already written a deed on the former's instruction, some scholars hold that, as long as the money has not yet passed to the borrower, the lender remains free to retract from the loan (Resp. Rashba,   vol. 1, no. 1054; Sh. Ar., ḤM 39:17), while others preclude him from so doing (Sefer ha-Terumot 48:1; Maggid Mishneh, Malveh, 23:5). In the case of an oral loan, the lender may withdraw at any time before handing over of the money (Netivotha-Mishpat, Mishpat ha-Urim, 39, n. 17). -Repayment Date WHEN SPECIFIED If a specified date was stipulated between the parties, the lender may not reclaim the loan prior to that date (Mak. 3b; Yad, Malveh, 13:5). Some scholars maintain that the lender – even in circumstances where he has reason to fear the borrower's imminent departure abroad, or is aware that the latter may be squandering his assets and therefore become unable to repay the debt on the due date – is not entitled to anticipate the day of repayment (Teshuvat ha-Ge'onim no. 45; Sefer ha-Terumot 16:3; Tur, ḤM 73); other scholars invest the court with discretion in the matter and the power to order distraint of the property in the borrower's possession (Resp. Rif. no. 113; Resp. Rashba, vol. 1, no. 1111). It was held that the court might do this only if the borrower is squandering his assets, otherwise – even though his financial position may be steadily deteriorating for other reasons – the court will not have the power to intervene prior to the due date of repayment (Yam shel Shelomo BK 1:20; Siftei Kohen ḤM 73, no. 34, see also below; execution (Civil). WHEN UNSPECIFIED A loan for an unspecified period is given for 30 days (Yad, Malveh 13:5), and may not be reclaimed within this period. If it is customary in a locality to retain a loan of unspecified duration for a longer or a shorter period, that custom is followed (Sh. Ar., ḤM 73:1, Sma and Siftei Kohen ad loc.). Some scholars expressed the opinion that in this matter even the gentile custom is followed (Sma, loc. cit.) – but others disputed this (Siftei Kohen, loc. cit., n. 1 and 39). FURTHER DIFFERENCES (1) In the case of a loan for a specified period, the borrower's plea that he has made repayment within the term of the loan is not believed, since "a person is not likely to make payment before the due date" (BB 5a), whereas in the case of a loan for an unspecified period the borrower's plea that he has paid within the 30 days as required is believed (Tos. to BB 5a). This distinction has been justified by the scholars on many grounds. Some hold that in the case of a specified repayment date, the borrower, for no particular reason, knows that he will have no money available until the due date, but not so in the case of an unspecified repayment date (Resp. Rosh, 76:3); others hold that when no date is specified, the borrower will feel ashamed if he should have money before the end of the 30 days and fail to make repayment – hence it is presumed that he will repay the loan, even within the said period, if he has the money (Shitah Mekubbeẓet, BB 5a); yet another view is that, in the case of an unspecified repayment date, the borrower is liable for repayment of the loan before expiry of the 30 days – save that he cannot be obliged by the court to make payment before then – hence he is likely to repay earlier if he has the money (Devar Avraham, vol. 1, no. 32). A minority opinion holds that, in the case of a loan for an unspecified period, the borrower is not likely to anticipate payment, and his plea to this effect is not to be believed (Nov. Ramban BB 40a). (2) Apparently even those who adhere to the opinion that the property of a borrower – even when it is being squandered by him – cannot be distrained until due date of payment of the loan agree with all other scholars that, as regards a loan for an unspecified period, the court may distrain the property in the debtor's possession even before expiry of the 30 days (Kenesetha-Gedolah, ḤM 73; Beit Yosef 20b). ANTICIPATION OF PAYMENT BY THE BORROWER Since determination of the repayment date is for the borrower's benefit (Ran to Ket. 81a, S.V. vegarsinan), it is permissible for him to repay the loan before the due date, regardless of the lender's wishes (Ran, loc. cit.). He may not, however, anticipate payment without the lender's consent when there is a substantial apprehension of an imminent and official change in currency values (Sefer ha-Terumot 30:2; see also below). -Acceptance of Payment Payment made to the lender against the latter's will is a valid payment; if the latter refuses to accept the money and the borrower throws it to him, he will be discharged (Sefer ha-Terumot 50:1; Tos. to Git. 75a). However, when the lender is prepared to accept payment, the borrower must make the payment into his hands and may not throw it to him (Git. 78b; Yad, Malveh 16:1). Payment to the lender's wife is held by some scholars to discharge the borrower, provided that she is accustomed to transacting her husband's business (see husband and wife ; Resp. Maharam of Rothenburg, ed. Prague, no. 225; Rema, ḤM120:2), but other scholars dispute that this is a valid discharge (Yam shel Shelomoh BK 9:39). -Place of Payment The lender may claim repayment at any place, even in the wilderness (BK 118a; Sh. Ar., ḤM 74:1). Upon due date the borrower may oblige the lender to accept payment at any settled place (yishuv), even if this is not the place where the loan was transacted, nor the place of residence of the lender or borrower (Sefer ha-Terumot, 30:1; Sh. Ar., loc. cit.). If the loan was transacted in the wilderness, the borrower may oblige the lender to accept payment there (Rema ḤM 74:1). -Method and Means of Payment A debt not yet due may be repaid little by little (BM 77b; Mordekhai BM no. 352; Ittur, vol. 1, pt. 2, S.V. iska); according to some scholars payment in this manner, although initially forbidden, is valid in retrospect (Bedek ha-Bayit ḤM 74; Siftei Kohen ḤM 74, n. 17). After due date the lender may, in the opinion of all scholars, refuse to accept payment in the said manner (Mordekhai, loc. cit.). The borrower must repay in money, and, if he has none, in land. The lender may refuse to accept the land and offer to wait until the borrower has money – even if this is after the due date (Resp. Rosh, 80:9; Sh. Ar., ḤM 74:6, 101:4). If the borrower has no money, the   lender may not instruct him to sell his assets in order to receive money for them, but must either take the assets as payment or wait until the borrower has money (Tos. to BK 9a). If payment in money entails a loss for the borrower, he may repay the loan in land (Tos. Ket. 92a and Ran ad loc.). If the borrower has money, land, and chattels, and wishes to pay in money, while the lender asks for land or chattels, some scholars hold the law to favor the lender and others the borrower (Sefer ha-Terumot 4:2; see also execution (Civil). -Fluctuation in Currency Values In case of official withdrawal and replacement of the existing currency, the position is as follows: If the new currency is of the same kind, the borrower pays in the currency in circulation at the time of payment (BK 97). If, however, the withdrawn currency is circulating in another country on the same terms as it formerly did in the country of its withdrawal, the lender – if he has the means of reaching such a country and there is no particular difficulty in transferring the old currency – will be obliged to accept the withdrawn currency in payment (BK 97; Sh. Ar., ḤM 74:7). If as a result of a change in the value of the currency there is a reduction in the price index of the commodities ("produce"), the borrower pays in accordance with the new currency value and deducts for himself the excess (BK 97b, 98a); if the reduction in prices result from factors unconnected with a currency revaluation, the borrower pays in the stipulated currency, without any deduction (Sh. Ar., YD 165). The view that the rules stated with reference to a currency revaluation must also be extended, by analogy, to the case of a currency devaluation (Aferet Zahar no. 165) was accepted as halakhah (Piskei ha-Rosh, BK 9:12; Ḥikrei Lev, Mahadura Bafra, ḤM 9) in preference to a contrary opinion (Piskei ha-Rosh, loc. cit.; Resp. Rashba, vol. 3, no. 34). In many Jewish communities takkanot were enacted which were aimed at reaching a compromise in disputes between parties relating to the manner of debt-payment in case of a change in currency values, and a decisive majority of the posekim inclined toward adjudging and compromising between the parties in terms of these takkanot (see kahana , bibl.; takkanot ha-kahal ). -Plea of Repayment (Parati; "I have repaid") An oral loan is repayable without witnesses; a loan in writing, before witnesses. In a claim for repayment of an oral loan, the borrower's plea that he has already made repayment is believed (Sh. Ar., ḤM 70:1); such a plea is regarded as a general denial of the claim, and on taking a solemn oath (shevu'at hesset) – the borrower is exempted (Sh. Ar., ḤM 70:1). Where there is a bond of indebtedness, the borrower's plea that he has made repayment is not believed, and the lender – on swearing an oath that he has not been repaid – proceeds to recover the debt (ibid.). (As regards the borrower's plea of payment prior to the due date, see above.) As a means of protecting the lender against such a possible plea of repayment, it became customary to stipulate, at the time of the loan, that credence be given to the lender upon his denial of a repayment plea by the borrower – such stipulation availing to dismiss the latter plea (Sh. Ar., ḤM 71:1). For the similar protection of the lender, the practice was adopted of stipulating at the time of the loan that it be repayable only before witnesses – the borrower's plea of repayment being thus deprived of credibility unless attested by witnesses (ibid., 70:3). In the latter case it still remained possible for the borrower to plead that he had repaid the debt before witnesses A and B, who had since gone abroad, and – upon making a solemn oath – become exempted; to forestall this possibility the practice was adopted of stipulating, "You shall not repay me except before witnesses so and so, or before the court" – thus precluding the borrower from pleading that he made repayment before some other witnesses (ibid., 70:4). -Multiple Loans If a lender has given the same borrower two separate loans and the latter seeks to repay on account of one of them, the lender may appropriate the payment toward whichever loan he pleases, without any right on the borrower's part to protest or maintain that he intended otherwise (Tur., ḤM 83:2 and Beit Yosef ad loc.; Sefer ha-Terumot 20:2). This rule only applies when both loans have already fallen due for payment (Sefer ha-Terumot, loc. cit.); if one loan has fallen due but not the other, the payment is deemed to have been made on account of the former (Resp. Radbaz, 1252 (181); if neither has fallen due, the law is apparently the same as for two loans already due (Radbaz, loc. cit.; Keẓot ha-Ḥoshen 83, n. 1). -Conversion into Loan of Other Contractual Obligation At times the practice was adopted, for various reasons, of converting an obligation originating from a transaction other than loan into an obligation of loan. This practice is referred to as zekifat ḥov be-milveh and was adopted – for instance in the case of a purchaser indebted to the seller for the purchase price – because of the restricted number of pleas possible against a claim for a loan-debt as compared to a claim for a debt originating from the sale of goods (BM 77b; ḤM 190:10). Zekifat ḥov takes place in one of the following ways: (1) by the writing of a special bond of indebtedness for an already existing debt; (2) by the stipulation of a date for the repayment of an existing debt; and (3) by the gradual accumulation of a debt, for instance by purchase on credit from a shop. In this way the original obligation is largely – or even entirely – extinguished and converted into a new obligation. From the time of such zekifah the debt is an obligation of loan only, the new obligation retaining none of the legal characteristics of the old (Gulak, Yesodei, vol. 2, pp. 116–8). -Minor as Party to a Loan By pentateuchal law, a minor has no legal capacity to lend. As long as the subject matter of such a loan is still intact (in specie), it must be returned by the borrower; hence in case of loss resulting from ones (force majeure) the borrower is exempt from liability, as the property is deemed to be in its owner's possession for purposes of loss arising from ones. The rabbis   enacted that a loan given by a minor should be valid, the borrower being liable also for loss resulting from ones (Gulak, Yesodei, vol. 1, p. 40). A minor who has borrowed is exempt from returning the loan, even after reaching his majority. According to some scholars, a minor who has borrowed for his own maintenance can be recovered from even during his minority (Gulak, loc. cit.; see also Legal Capacity). -Measures to Prevent "Bolting the Door" to Borrowers Hillel the Elder instituted a prosbul designed to overcome reluctance to lend to a borrower at the approach of the shemittah (sabbatical) year (Shev. 10:3; Rashi Git. 37a; see also takkanot ). Although according to pentateuchal law the need for derishah and ḥakirah (examination of witnesses) extends also to civil law (dinei mamonot) matters, the scholars enacted for the obviation of this procedure in the latter cases, so as not to bolt the door before borrowers (Sanh. 3a; see also practice and Procedure; witness ). Despite an opinion upholding the need, by the pentateuchal law, for three expert judges in matters of hoda'ot ("acknowledgments") and loans, the scholars enacted for the competence of a court of three laymen, lest the door be bolted before borrowers, for fear that no expert judges may be found to enforce the law (ibid.; see also bet din ). The scholars enacted that in certain circumstances the judges, if they erred, were not to be exempted from liability, in order not to discourage people from lending to others (ibid.). According to pentateuchal law, the creditor recovers the debt out of the zibburit ("worst land") of the debtor, but the scholars enacted that he might do so from the beinonit ("medium land"), for the reason mentioned above (Git. 50a; see also execution (Civil). According to those who held that the doctrine of shi'bud nekhasim was non-pentateuchal, the scholars enacted for a lender on a bond to recover from the debtor's nekhasim meshu'badim ("encumbered and alienated property"; see Lien; BB 175b). (Shmuel Shilo) -The Community as a Debtor The Responsa literature relates to the mode of conduct in cases where the community had taken a loan for its various affairs, and it has to settle the debt. Rabbi Shlomo b. Aderet (Rashba) was asked about a case in which community members were taxed in order to return the loan – whether taxation should be made according to the financial status of the community member at the time of taking the loan or according to the time of its discharge. Rashba ruled that legally this loan should be regarded as a loan taken by partners, and the burden of repayment is in the same proportion as when the loan was taken; therefore community members should be taxed according to their status at the time when the loan was taken. Nevertheless the community has the authority to enact that participation of each member should be made according to the time of repayment, because a loan taken by the community could be regarded differently from an ordinary loan – "they are unlike debtors who take the loan directly for themselves, but like debtors for the community chest." Nevertheless, Rashba negates the possibility of obliging recent citizens of the community, who were not members of the community when the loan had been taken, because it is like a retroactive obligation which is not equitable (Resp. Rashba, 1, no.777; 3, no.412; see takkanot ha-kahal ). For the present discussion, see also legal person . (Menachem Elon (2nd ed.) -BIBLIOGRAPHY: Gulak, Yesodei, 1 (1922), 145f.; 2 (1922), 33–35, 42f., 83–88, 105–9, 113–8, 170–2; 3 (1922), 102–6; 4 (1922), 85–90; idem, Oẓar, 205f., 208; J. Rappaport, in: Zeitschrift fuer vergleichende Rechtswissenschaft, 47 (1932/33), 256–378; Herzog, Instit, 1 (1936), 121–4, 219f., 359f.; 2 (1939), 57f., 186f., 215f.; J.S. Kahana, in: Sinai, 25 (1949), 129–48; ET, 1 (19513), 263–6; 4 (1952), 110–4; 5 (1953), 92–132; 9 (1959), 215–40; M. Silberg, Kakh Darko shel Talmud (1961), 71–75; M. Elon, Ḥerut ha-Perat… (1964); idem, Mafte'aḥ, 48–57. ADD. BIBLIOGRAPHY: M. Elon, Ha-Mishpat ha-Ivri (1988), 1:104f., 120, 189f., 252, 264, 346, 418f., 476, 482f., 487f., 489, 498, 528, 531f., 533, 535, 569, 597, 600, 626, 636, 653f, 733, 775f, 813; 2:866, 983; 3:1443; idem, Jewish Law (1994), 1:117f, 135, 212f, 295, 309, 416; 2:510f, 580, 587f, 593f, 596, 607, 643, 646f, 649, 651, 699, 738, 743, 774, 788, 808f, 904, 953f, 996; 3:1058, 1187; 4:1716; M. Elon and B. Lifshitz, Mafte'aḥ ha-She'elot ve-ha-Teshuvot shel Ḥakhmei Sefarad u-Ẓefon Afrikaḥ (legal digest) (1986), 89–103; B. Lifshitz and E. Shochetman, Mafte'aḥ ha-She'elot ve-ha-Teshuvot shel Ḥakhmei Ashkenaz, Ẓarefat ve-Italyah (legal digest) (1997), 61–67; I. Warhaftig, Hitḥayyevut (2001).