We’ve learned that in order to be halachically covered by the heter iska there must be an iska/investment that the lender will acquire. We explained that the borrower must either own or be purchasing with the loan a profitable item that will produce returns for the bank. 

(As noted, one does not have to use the actual money from the bank to make the purchase, as long as the loan facilitates the purchase of the property. For example, one can borrow from the bank to pay off his debt if that will free his other assets, enabling them to be used to buy a property or another investment.)

Now, what about people who do not meet the above standards? They are not borrowing to buy a home or other investment,  nor do they own a home or  business that the bank could theoretically purchase. They need to pay for their bread and milk. Are they excluded from a heter iska? Can they allow their account to go into overdraft? 

Several poskim permit reliance on the heter iska providing they have a job that the loan will allow them to maintain.  Take the example of someone who is in debt and needs to move to a different city to find cheaper housing, which means he will have to leave his job. It would be permitted to borrow from a Jewish bank with a heter iska, because the bank is investing in the worker and his income. A person learning in Kollel, however, would not qualify for the above heter.

Consequently, most bachurim and girls may not borrow with interest from an Israeli bank because they are not covered by the heter iska. (If they are borrowing money to then lend it to others with a heter iska, they now have a source of income, and are covered.)

Accordingly, a bachur or girl holding an account in an Israeli bank must be very careful not to go into overdraft, because they would be guilty of borrowing with interest. (A possible solution is to make them partial owner of a parent’s property, however the details are beyond the scope of this article.)

Some poskim do allow someone who does not meet any of the aforementioned criteria to take a loan in certain circumstances. In such cases, a rav should be consulted.