Lending money with interest

  • Thread starter Thread starter NuclearReceptor
  • Start date Start date
Status
Not open for further replies.
N

NuclearReceptor

Guest
I’ve read from couple Catholic sources that there’s no inherent sin in lending money with interest (I’m assuming if it’s not unreasonable or predatory or acting as a loan shark).

The reason I ask is that I joined a P2P money lending website (Lendingclub dot com) and lent people money for a fixed term with fixed interest.

Now I regret this decision — I’m making money off of interest (it’s not a HUGE sum of money I lent — people can loan some or all of the requested amount).

Am I committing a sin?

I can donate any profit (assuming the loan is paid off) to a charitable organization. I just feel a bit uneasy about this.

Dealing with money is not my thing – I don’t know why I even joined.
 
When you put money in a bank, that bank takes your money, invests it, and pays you a small percentage of what it earns on its investment. When you invest in a company, you purchase a small portion of that company, and receive a small portion of its profit in return for the money you put in initially.

What you’re doing is the same thing.

As long as you’re charging a reasonable interest rate, you’re good.

Also, as to why you joined, it may be because these sorts of things can actually be good. Most “professional” lending establishments charge people an outrageous amount of interest for small loans that come from sudden, unexpected, expenses. I once saw a commercial for a place that literally charged a 100% interest rate per term, and the term on those is anywhere between a day and a year. By providing an opportunity for people to get the money they need from somewhere other than a bank or scalper, you’re helping them while also making a small amount for yourself in exchange for the risk.

Just keep your interest rates reasonable, and don’t seek to take advantage of people.
 
Last edited:
Are you talking about things like payday loans and other legalized usurers?
 
The interest rate depended on their credit scores. The loans ranged from 15-25%.

If I could’ve negotiated a lower rate, I probably would have, but it’s a predetermined agreement between the middle-man (lendingclub) and the person taking out the loan.

I just hope they’re not suffering financially or that I’m contributing to their financial worries…
 
I’ve never used payday loans so I’m not sure, but similar – except the money is lent by complete strangers online.
 
That’s… well, I honestly can’t tell you if that’s high or not. I don’t have experience with this type of thing.

My gut is that that feels high, but I can’t be the judge of that.
 
Is it legal? Generally, we leave this to the law of the country. If it is not illegal, and you will not be in trouble because of it, the latter may not apply but the former definitely does, you can have the discretion to do so.

As Jesus said, give to Caesar what belong to Caesar.
 
Presuming that the end customer you are loaning to is a rational person, and not in desperate straits (which can influence people to do stupid things) you can trust that they entered into this loan agreement because it was in their best interests (financial or otherwise) to do so. No pun intended.
 
It’s my understanding that a lot of microfinance sites— like Kiva, Lending Club, Prosper, whatever-- work on the principle that the loan has already been made. Then ordinary people come along and think they’re helping so-and-so, which is what encourages them to help subsidize the loans— the thought of helping a struggling individual on the other side of the world— but the loans have actually already gone through, whether or not it gets funded on the website or not. So that’s where so many of the defaults come from— I think I was reading a (dated) article a week or two ago saying that basically 90-95% of (Lending Club’s? someone else’s?) defaults came as a result of the failure of one or two banks. Or something. I don’t remember the exact article, but when I was talking about it with my friends, the points I remember were that (a) A & B-tier borrowers default just as much as C/D/E-tier borrowers; (b) it’s harder to get in on the A & B-tier loans than it used to be, because a lot of huge investment companies are investing their clients’ money into microfinance and are snapping up the “good” ones; and (c) “I’ll be lucky to break even” from one friend with 400 loans out and a mass of defaults piling up.

So, just remember that this debt is unsecured. And the loans have already been made. It plays on our sense of charity, helping out the less fortunate, and earning a little money on the side… but it’s neither safe nor solid nor reliable. If you have money to play with, have fun; but if you’re being serious, invest it elsewhere.
 
Last edited:
It was (allegedly) either for debt consolidation or credit card debt.
 
Thanks for the article. I should’ve researched this more carefully. If the loans default, I’ll consider this a lesson in life…it wasn’t a huge sum of money to begin with, although I’d rather not lose it either…
 
Here we go. Here are some of the articles I was thinking of.

Reading the comments for a snapshot of real-life people’s experiences was helpful.

Lending Club Investing: My Review After Five Years As An Investor

Lending Club vs. Prosper – Which Is Better For Investing?

Kiva Is Not Quite What It Seems

One of the problems we run into, when we’re researching stuff online, is that we have trouble differentiating between how things were in 2008, versus how things were in 2011, versus how things are in 2018, especially if the article doesn’t have a clear datestamp.

Money has been essentially free for the last, what, 8? years, in an effort to make people want to spend it, and get the economy rolling, rather than saving it. That approach didn’t really work. The last time I bought a 1-year CD, I got about 2% on it in 2008. So essentially, if I have $1,000, and I tie it up for a year in a CD, I get $20 for the trouble. Big whoop. 🙂 But the CD rates continued their slide-- and in early 2016, I think I could get a whopping 0.25% rate— which meant I’d get $2.50 for locking up my thousand dollars for a year. 😛 But none of that’s anything like the 11% you’d get for a 1-year CD in 1984 ($110 return for locking up your thousand dollars) or 17% in 1980 ($170). Of course, there was a lot of turmoil then as well and borrowing was even more expensive— and that was why interest rates for savings were so desirable, to encourage people to lock their money up so the banks could use it more profitably through loans, mortgages, and things.

Right now, my savings account, which once-upon-a-time earned me 5%, now earns me 0.25% interest. And so I don’t stash anything away in it— I put my money in my rental biz, which requires a lot of work, delayed gratification, up-front capital, and no guarantee of success— but has the ability to gross back in 3-5 years everything I put into it, and then continue to keep working. But I keep wanting there to be a magic button where I can get 10%, 15%, 20% on my money without doing anything or taking on risk… but everything I find has the risk, but not the return. 🙂 That’s what I like about real estate-- the control. Risk is there, and disasters still hit, but when stuff goes wrong, it’s usually because of my mistake, not some faceless corporate entity’s bad judgment. 🙂
 
I should’ve converted the money into silver bullion and kept it under the mattress. It would survive an apartment fire at least. 😎

More importantly, is this a sin? Since it’s a 3 year term, am I under a state of sin for that period of time?

Ugh, this is what I get for doing things on a whim…
 
The Church used to teach that lending money for interest was a sin. Now the Church says that somehow modern knowledge of economics makes it no longer a sin. It says that only unfair levels of interest is a sin. But no definition of unfair is offered. So one can’t objectively know if he is sinning.

The Church doesn’t have a problem with modern banking or say modern bankers are sinners. Even though this goes against tradition I personally go with what the Church says on this. If she is wrong then culpability for my sin is lessened. So if I were you I wouldn’t worry about it as far as the sin aspect.
 
… and what belongs to God give to God.
That phrase Jesus said can also mean that God and Caesar do not mix since they are presented in two different sentences.😉
 
Does the Vatican have a bank?

Yes, the Vatican has a bank.

Does the Vatican charge interest?

I bet they do.

I don’t think you have anything to worry about, as long as you don’t turn into a payday lender with a stable full of goons to beat people with metal pipes if they don’t pay outrageous rates on time. 😉
 
In that case, I wouldn’t have any qualms. Clearly you were saving them money.
 
Socrates92 said:
That, and the actual nature of money and exchange itself has changed.
Click to expand...
The only way money has changed is that governments have reneged on their promise to exchange notes for gold. That itself is of course grossly immoral. Other than that money and exchange has been the same for a long time and certainly the same since when interest was immoral and now moral.
 
Status
Not open for further replies.
Back
Top