We’ve been discussing the relatively common issue of taking a loan for someone else and passing it on. As we explained, this presents a real problem of ribbis, because the first borrower is lending his money with interest to the second party, who only receives the principle of the loan.

While in theory, this issue is as equally problematic in Eretz Yisrael as in chutz laaretz, there is a leniency that would only apply in Eretz Yisrael, where a standard loan from the bank needs to be covered by a reputable heter iska. 

If the official borrower knows that since his loan is covered by a heter iska, his loan is an investment, and therefore he passed it on as such, and the second borrower is aware of this as well, even if they did not sign a heter iska, then there may be room to rule that they are included in the heter iska and therefore they are not in violation of ribbis. 

However, there is an important caveat: This is true only when both parties are somewhat knowledgeable about ribbis and aware that they might need a heter iska. If they never thought that it was necessary, we cannot say the loan is subject to the conditions of the heter iska. 

This is one of the instances where even the basic knowledge of a heter iska can make all the difference between permitted and prohibited, and a safe and secure “loan” versus a costly mistake.

In chutz laaretz, though, where a bank loan is not usually subject to a heter iska, this heter would obviously not apply. 

Here’s another case in point. Let’s say two sets of parents each commit to giving their engaged couple fifty thousand dollars within a year of the marriage. Then the parents realize that they cannot lay out the money and ask the couple to borrow the sum from the bank, which they will repay. Many people may not realize that unfortunately what has really happened is that the parents have borrowed money from their children with interest. (In essence what has happened is that the couple used their own money to pay their parents’ debt and required the parents to repay them via the bank, principle plus interest.) Here too the heter iska between the bank and the children may save the day.