Last week, we talked about the Bermans, who asked their relative to take out a loan from the bank for them in his name. Obviously they committed to paying him back monthly, on time. 

This scenario isn’t unusual. Often, when the bank declines to give a potential home purchaser a mortgage, he will ask a wealthier relative or friend to sign on the contract for the home. When the “purchaser” is approved for a mortgage, he passes on the money to the first person. 

As we discussed last week, this entails ribbis, because the borrower received only the principle and is paying the legal owner’s mortgage including the interest. 

The same type of issue can come up with a small loan, known in Eretz Yisrael as halvaah berega, which allows one to immediately borrow thousands of shekels with interest. If you need more than what the bank is offering, or better terms, and therefore ask someone else to take the loan for you in his name, repaying the loan with the requisite interest payments violates ribbis min haTorah.  

How can this be handled in a halachically permitted manner? Ideally, the money should be transferred from the first, official borrower to the second party with a clear, written stipulation that this loan is subject to a specific, valid heter iska. (Obviously, for the heter iska to be effective, the lender must ascertain that all the conditions previously delineated are met.) 

However, if one becomes aware of this issue after he has started payment on such a loan, or after the loan was entirely repaid, he must immediately take care of the ongoing ribbis issue. This is accomplished by turning the existing loan into an iska. The procedure is complex, and a rav well versed in Choshen Mishpat and hilchos ribbis should be contacted. This will allow the lender to collect the interest from then on. 

However, the above solution will not work retroactively. The lender is obligated to return the money he received as interest, or to subtract it from the remaining debt. Therefore, this can end up being an extremely costly mistake. Still, it’s always worthwhile to discuss the case with a knowledgeable rav; depending on the case, there may be room to salvage something. There is also a leniency which may apply specifically in Eretz Yisrael that we’ll discuss next week.