Prohibition of interest in a late-payment penalty
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Question
Is it permitted to lend money for a fixed period, and if the borrower does not meet the payment, he will pay a penalty?
Answer
It is prohibited, even if the penalty is a one-time payment and does not increase.
Source
Shulchan Aruch, Yoreh De'ah 177:15–16; Chavvat Da'at 163:4.
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