What may the borrower use the money towards

 

What may the borrower use the money towards?[1]

It is forbidden for the debtor to take the borrowed money and use it for a purpose that is not business related, in a way that the money becomes lost from the lender causing the lender to not have from where to collect his loan. If the borrower does so, he is considered a Rasha.[2] This applies even if the lender is very wealthy and the borrower is poor. [This Halacha translates as follows: It is forbidden for the borrower to take the money and spend it on trivial matters or any matter that is not a great need.[3] However if there is a great need, some Poskim[4] rule it is permitted for him to spend it on this great need even though the lender will not have from where to collect his debt. However, other Poskim[5] rule that it is forbidden to spend it even for a great need if the lender will not have from where to collect his loan, and so is implied from Admur.[6] Thus, it is only permitted to use the money for a business investment and not to purchase items and the like. Accordingly, in the event that the borrower desires to use it for another purpose, he is to explicitly ask the lender for permission to borrow the money for that purpose, as explained in the Q&A below. In the event that the borrower has separate income coming in at a later date that can cover the loan, or that he owns items that can be sold to cover the loan, then seemingly he is allowed to use the money for any purpose that is considered a necessity.[7] However, he should not use the money on extravagances unless explicitly asked from the lender.]

Not to lend to an irresponsible spender:[8] If the lender knows that the borrower is of the above character [and wants to use the money in a way that will not produce any income and will leave the lender without the means of collecting his debt], then it is best not to lend him the money.[9]

 

Summary:

One who borrows money without stating to the lender the intended purpose for which the money will be used may not spend the money in a way that will cause the lender to not have from where to collect the loan. This applies even in a case of great need. He may however use the money to invest in a business which may bring profit and allow the lender to collect the loan. Likewise, if he has other expected income from which he can use to pay the loan, or he can sell items to help cover the loan, then he may use the money for matters of need.   

Q&A

May one borrow money for trivial purposes, or purposes that are not a great need or business related if he states his intentions to the lender?[10]

If the borrower asked for the money to use for a certain purpose it may be used for that purpose even if it is trivial and will lead to the lender not having from where to collect his loan [and the lender is made aware of this beforehand[11]]. The above prohibition of using the money for non-business purposes, only applies when it is done without knowledge of the lender. 

May one who has no source of income borrow money to pay rent or buy food?

He may only do so if he tells the lender of his intended use of the money and that he currently does not have any expected income. 

 

If one borrowed money for a certain purposes, may he use the money for a different purpose?[12]

If one borrowed money for a certain purpose, it is forbidden for him to change his mind and use the money for another purpose, unless he borrowed the money to invest in a business and the money is being invested into a different business, and will not get lost from the owner.[13] 

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[1] Admur Halva 5; Michaber C.M. 97/4 “spend it for no need and make it lost”; Smeh 97/5 “This applies even if the borrower is not intentionally using it for no need but there is not a great need to use it”; Rambam Halva 1/3

[2] The reason: As the verse states “Loveh Rasha Velo Yeshalem.” [Admur ibid]

[3] Smeh 97/5; Rabbeinu Yona Avos 2/9

[4] Smeh 97/5

[5] Rabbeinu Yona Avos 2/9

[6] As Admur ibid stipulates that the money may only be spent “for business purpsoes” unlike the Smeh ibid who allows it to be used for great need.

[7] See Ahavas Chesed Dinei Halvah 1/9 that if a Mashkon is given he may lend him the money if he wants even if it will be spent in a way that cannot be collected, and the same would apply to if he has items he can sell, as Admur Halvah 13 rules that so long as one has more than Sidrei Baal Chov one does not transgress “Lo Siyeh Lo Kinoshe.”

[8] Admur Halva 5; Michaber C.M. 97/4; Tur C.M. 97/8

[9] The reason: As if he lends him, in the end he will need to pressure him to pay back the money and will transgress each time the prohibition of “Lo Sihyeh Lo Kenoshe.” [Admur ibid]

[10] Taz, brought in Beir Heiytiv 97/2

[11] As otherwise, the lender expects to collect his loan on time and will pressure him until he does, which will transgress Lo Siyeh Kenokesh.

[12] Taz, brought in Beir Heiytiv 97/2

[13] The reason: As so long as the lender has from where to collect his loan, he does not care what business it is invested into. [Taz ibid]

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