Ribbis: Matters of Interest

Re’eih

Collateral
/using a
collateral phone

If a lender was given collateral (a mashkon) by the borrower, such
as a cellphone with unlimited minutes, may the lender make use of the
collateral for himself, or would that be considered as extra payment and
consequently present a ribbis problem?

If the borrower had
not allowed the lender to use his phone previously in
the same manner, he would not be
allowed to use it now either.

If the borrower had
allowed such use previously, the lender may do so now as well.

Expensive
collateral

A borrower gave the lender an item as collateral which was
significantly more valuable than the loan amount. Subsequently, the borrower
defaulted and did not pay back the loan.

May the lender keep the collateral, or would the extra value of the
collateral be considered “extra payment” and thereby present a ribbis problem?

There is a
disagreement among poskim if this resembles
ribbis. Therefore one should be machmir and
return the difference to the borrower.

However this issur only applies where the parties verbally agreed at the outset that
the collateral will be confiscated in the event of loan default (since such an
“agreement” can resemble ribbis ketzutza).

In cases where the
lender decided on his own volition to keep the mashkon (with the borrower’s subsequent consent) and there was no pre–determined agreement, it would be permitted.