Interest on a loan that was not renewed
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Question
A lender lent money for two years at an annual interest rate of 12% (with a heter iska, of course). The contract states that the loan can be extended with the agreement of both parties.
When the time for repayment arrived, the borrower did not return the money, saying that only in a few months things would work out for him.
The lender does not trust him and therefore is not willing to extend the repayment date of the loan.
The lender could agree, in principle, to extend
the loan agreement (and then it is clear that the borrower would be obligated to continue with the terms of the agreement), but the lender is afraid that this will give the borrower a kind of “permission” to postpone the repayment yet again.
Since these are close relatives, the lender does not, at this stage, want to take the borrower to a Beit Din (rabbinical court).
*The question is: for the months during which the borrower does not repay the debt (unjustifiably), can the borrower avoid paying the interest for those months of delay?*
He will claim that no new agreement was signed, and that the lender did not agree to extend the repayment date of the previous agreement.
(The wording in the contract is: “the loan bears annual interest of 12% per year, and the agreement may be extended with the consent of the parties”).
Thank you.
I would be happy to receive an answer from the rabbi himself.
When the time for repayment arrived, the borrower did not return the money, saying that only in a few months things would work out for him.
The lender does not trust him and therefore is not willing to extend the repayment date of the loan.
The lender could agree, in principle, to extend
the loan agreement (and then it is clear that the borrower would be obligated to continue with the terms of the agreement), but the lender is afraid that this will give the borrower a kind of “permission” to postpone the repayment yet again.
Since these are close relatives, the lender does not, at this stage, want to take the borrower to a Beit Din (rabbinical court).
*The question is: for the months during which the borrower does not repay the debt (unjustifiably), can the borrower avoid paying the interest for those months of delay?*
He will claim that no new agreement was signed, and that the lender did not agree to extend the repayment date of the previous agreement.
(The wording in the contract is: “the loan bears annual interest of 12% per year, and the agreement may be extended with the consent of the parties”).
Thank you.
I would be happy to receive an answer from the rabbi himself.
Answer
Shalom u’vracha
The validity of the loan under the terms of the heter iska continues even without a renewed agreement between the parties, until they explicitly decide to cancel it.
Therefore, even without a formal statement, you may continue to collect the interest under the iska arrangement.
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