Is what i'm doing a mortal sin

[boofind]

Sins are called “the sins that cry to heaven for vengeance”

Taking advantage of the poor (Exodus 2:23)​

During that long period, the king of Egypt died. The Israelites groaned in their slavery and cried out, and their cry for help because of their slavery went up to God.

Please help and tell me if what I’m doing is going to be a mortal sin.

I would like to set up a small loan company that lens out small loans between £50 and £250 during a period of 40 days.

Example if they take out £200 i will charge them £225.

I’m not going to charge a lot and will not len to anyone who has a poor credit rating and is unlikely to repay it back and they have to have a job and make over £750 per month.

NOTES if they are unable to pay

If they are unable to pay on the repayment date I will work with them to break the loan amount between 3 - 6 months.

I will not charge any interest on the loan past the repayment date if they haven’t made the repayment.

I will give them 4 weeks to respond to any emails or recorded mail if they haven’t made repayment on the loan before calling any debt collection agency.

The above seems fair to me but I’m committing a mortal sin by setting this company up.

 

[PeterMuz]

Sins are called “the sins that cry to heaven for vengeance”

Taking advantage of the poor (Exodus 2:23)​

During that long period, the king of Egypt died. The Israelites groaned in their slavery and cried out, and their cry for help because of their slavery went up to God.

Please help and tell me if what I’m doing is going to be a mortal sin.

I would like to set up a small loan company that lens out small loans between £50 and £250 during a period of 40 days.

Example if they take out £200 i will charge them £225.

I’m not going to charge a lot and will not len to anyone who has a poor credit rating and is unlikely to repay it back and they have to have a job and make over £750 per month.

NOTES if they are unable to pay

If they are unable to pay on the repayment date I will work with them to break the loan amount between 3 - 6 months.

I will not charge any interest on the loan past the repayment date if they haven’t made the repayment.

I will give them 4 weeks to respond to any emails or recorded mail if they haven’t made repayment on the loan before calling any debt collection agency.

The above seems fair to me but I’m committing a mortal sin by setting this company up.

You are not taking advantage of the poor. If you were trying to find people that could not afford to take out a loan and you made it knowing that you would charge them a ton of fees and interest then there would be a moral/ethical issue there. I would say that you are perfectly fine.

 

[JohnAlexander]

15% over 40 days? That is over 100% on a yearly basis. That is called usury and it is a sin. Who borrows at that ridiculous rate of interest? The desperate. Don’t take advantage of the desperate.

Look at what Kiva does with micro loans. They don’t charge that much interest by a long shot.

 

[Ponyguy]

I’m not knowledgeable about Britain, but the USA has laws regulating interest rates.
An American could get a free vacation at the Graybar Hotel for charging that amount of interest… unless he was a dues-paying member of Il mafioso…

 

[boofind]

thank you JohnAlexander for pointing out Usury. I am in the process of investgating usury. At the moment i’ve got christian/catholics views on usury some say that i’m doing a sin some are not.

I will look into this and see what i’m doing is usury and what i can do and change my company to make sure it’s not. If there is nothing I can do to pervent usury then i might not go ahead with it.

 

[Newbie2]

I too am unfamiliar with lending practices and interest rates outside of the USA, but assuming what you’ve proposed is legal, I don’t see usury here. I am also assuming that the UK has laws to limit interest rates to prevent usury.

If other such companies are charging that rate of interest, then no usury. If they’re much less, then at the very least it could be considered an attempt at usury, although I would assume that you wouldn’t get much business if people could borrow elsewhere for less.

I would also suggest that you check out prevailing interest rates for similar type loans. If your rates are similar, that would be fine. However, if you were to charge a wee bit less, you might get more business and definitely wouldn’t have to worry about sinning.

Also, I think these provisions would mitigate any suggestion that your lending practices would be usury:

*If they are unable to pay on the repayment date I will work with them to break the loan amount between 3 - 6 months.

I will not charge any interest on the loan past the repayment date if they haven’t made the repayment.*

 

[The_Bucket]

15% over 40 days? That is over 100% on a yearly basis. That is called usury and it is a sin. Who borrows at that ridiculous rate of interest? The desperate. Don’t take advantage of the desperate.

Look at what Kiva does with micro loans. They don’t charge that much interest by a long shot.

Even credit unions charge that kind of interest on payday/short term loans. If you go to a payday lender/check casher you’re going to find an APR in the thousands. Bottom line is that companies that microlend, especially to individuals with lower credit ratings, have to protect themselves against the credit risk. There’s nothing wrong with that.

 

[Sir_Knight]

15% over 40 days? That is over 100% on a yearly basis. That is called usury and it is a sin. Who borrows at that ridiculous rate of interest? The desperate. Don’t take advantage of the desperate.

The sin of Usury was defined by the Fifth Lateran Council (Session X) in 1515 as “when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk” – meaning, to profit from something which produces nothing without any effort.

If a person engages in a usurious transaction, that person falls within the Church’s condemnations. The Catholic Church condemns usury because usury is contrary to the divine and natural law.

However, the Catholic Church has NEVER defined “usury” as “charging interest on a loan.”

This MISTAKEN idea comes from the fact that in the Old Testament there was little or no opportunity to invest money to make a return. Kingdoms were either not big enough or did not last long enough or both, for an established monetary system to develop and take root. Money was used for private, not commercial exchanges. Accordingly, using Aristotelian terminology, money was considered “barren.” That is, money had no inherent value while idle. It could only be consumed or hoarded. Thus, to charge interest on a loan would have been the sin of Usury - profitting from something which produces nothing without any effort.

For example, if you have 100 pieces of silver and you didn’t use it and nobody borrowed it, it would be just sitting there gathering dust. Therefore, if would have been wrong to charge me interest if I borrowed ten pieces because that is income that you would not have realized if I didn’t borrow and the money and it just sat there.

Of course, the nature of money has changed over the centuries even as far back as during the time of the Roman Empire (they were big enough and lasted long enough to develop a monetary system). In today’s global economy of competitive markets, money is no longer “barren.” To the contrary, money is “fruitful” because there are many opportunities to invest money to make a return. Thus, a transaction that would have been usurious in the past would not necessarily be usurious today. Because money in today’s economy is “fruitful,” the act of loaning money in such an economy at interest is not usurious (since money has value even when idle).

We see that Jesus actually endorses the practice of charging interest on a loan in His parable of the servants and talents. Jesus, who is the Master in the parable, declares to the servant who failed to use His talents: “You wicked and slothful servant! You knew that I reap where I have not sowed, and gather where I have not winnowed? Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest” (Matt. 25:27; Luke 19:23).

Since Jesus condemns the servant for failing to invest His money to make interest, the charging/earning of interest cannot be an intrinsically evil practice. Jesus would not chastise His servant for failing to do evil. Thus, we can conclude from the bible that it is morally licit to charge a reasonable rate of return on a loan under the right circumstances. As we have seen, since money in our modern markets is “fruitful” (that is, money can be productive even when idle) it is morally permissible to charge/earn interest on money (which is NOT “usury”). This is the teaching of Sacred Scripture and the Holy Catholic Church.

Hope this helps.

 

[ad_altare_Dei]

Excellent explanation, Sir Knight.

Boofind, I think Sir Knight has pointed out an important distinction here. Usury is not simply taking interest on a loan. Now, one could charge an unjust amount of interest because he could take advantage of the poor, but that’s not going on here. To be honest, I think that the mitigating provisions you list for these short term loans are being generous. I say go for it, and don’t get too scrupulous. You’re scrupulosity could cause you to make some imprudent provisions.

But seriously, if I needed a short term loan, I’d love to go to a place with that sort of leeway, even at 12.5%.

 

[white_sheep]

15% over 40 days? That is over 100% on a yearly basis. That is called usury and it is a sin. Who borrows at that ridiculous rate of interest? The desperate. Don’t take advantage of the desperate.

Look at what Kiva does with micro loans. They don’t charge that much interest by a long shot.

I disagree. Businesses have to charge for their time and labor. If you sit and talk to someone for an hour, that’s an hour they had to pay someone to do that. Those costs will come out in a much higher percentage for small loans than for large ones. Issuing a loan for $200 and only expecting back $225 is so small a gain that it seems like a bad business plan. I’d want $250, and I’d keep the interest going if they were late having the money tied up is a real cost and stopping the interest would be losing money.

 

[mark_a]

Sins are called “the sins that cry to heaven for vengeance”

Taking advantage of the poor (Exodus 2:23)​

During that long period, the king of Egypt died. The Israelites groaned in their slavery and cried out, and their cry for help because of their slavery went up to God.

Please help and tell me if what I’m doing is going to be a mortal sin.

I would like to set up a small loan company that lens out small loans between £50 and £250 during a period of 40 days.

Example if they take out £200 i will charge them £225.

I’m not going to charge a lot and will not len to anyone who has a poor credit rating and is unlikely to repay it back and they have to have a job and make over £750 per month.

Although I think you will be lending money to the most despirate. . . . .

NOTES if they are unable to pay

If they are unable to pay on the repayment date I will work with them to break the loan amount between 3 - 6 months.

I will not charge any interest on the loan past the repayment date if they haven’t made the repayment.

I will give them 4 weeks to respond to any emails or recorded mail if they haven’t made repayment on the loan before calling any debt collection agency.

The above seems fair to me but I’m committing a mortal sin by setting this company up.

I think you are going to get taken advantage of.

 

[boofind]

I would like to say thank you for all the people who replyed to my comment. I’ve take them aboard and still thinking if I should do this or not. I’m going to talk to my priest about loans and see what he says in a few weeks. I might do somthing like a local job board instead or both.

cheers
Richard