Can Christians Charge Interest on Loans?

The question of whether Christians can charge interest on loans has been a subject of extensive discussion and varied interpretation throughout history. This complex financial and ethical dilemma has deep roots in religious texts and has evolved significantly with changing economic landscapes. Exploring the biblical origins, historical interpretations, and contemporary Christian viewpoints provides a comprehensive understanding of this long-standing debate.

Biblical Foundations

The Old Testament addresses charging interest, primarily when lending to fellow Israelites. Exodus 22:25 states that if one lends money to a poor person among God’s people, they “shall not be like a moneylender to him, and you shall not exact interest from him.” Leviticus 25:35-37 instructs against taking interest from a poor Israelite, emphasizing support for those in need. These prohibitions underscore a communal responsibility to protect vulnerable members of society from exploitation, reflecting a divine concern for justice and compassion in an agrarian society where loans were often for subsistence.

Deuteronomy 23:19-20 further clarifies this, prohibiting interest on loans to a “brother” (fellow Israelite) for money, food, or anything lent, but explicitly permitting charging interest to a “foreigner.” This distinction suggests that the primary concern was not universally against all interest, but against exploiting those within the covenant community, especially the poor, who might be borrowing out of necessity rather than for commercial ventures.

New Testament principles also offer guidance, though not directly on interest. Luke 6:34-35 encourages lending “without expecting to get anything back,” promoting radical generosity and love for others. Additionally, the Parable of the Talents in Matthew 25:27, where a master rebukes a servant for not investing money with bankers to earn interest, is sometimes interpreted as an implicit acknowledgment of legitimate financial growth through interest. The Epistle of James 2:15-16 stresses that faith must be accompanied by practical action, such as providing for those in need, rather than merely offering well wishes.

Historical Interpretations

From early Christianity, charging interest, often termed “usury,” faced strong condemnation. Early Church Fathers widely viewed any interest on a loan as usury, equating it with unjust gain and a lack of charity. This perspective was rooted in the idea that money itself was sterile and could not naturally “breed,” making any charge for its use inherently wrong. Councils like the Council of Nicaea (325 CE) specifically forbade usury, initially for clergy and later for all laypeople.

During the medieval scholastic period, influential theologians like Thomas Aquinas elaborated on this condemnation. Aquinas argued that charging interest was unjust because it involved selling something non-existent, like charging for the use of money consumed in its immediate exchange. He considered it a “double charging” for both the item and its use, a sin against justice. However, as economies evolved, particularly with the rise of commerce, distinctions began to emerge. Later theologians recognized legitimate justifications for charges beyond the principal, such as compensation for potential loss (damnum emergens) if the lender needed the money, or for foregone profit (lucrum cessans) if the lender diverted capital from a profitable venture.

The Reformation era re-evaluated this stance. While figures like Martin Luther continued to condemn exploitative interest, John Calvin notably permitted interest on commercial loans, distinguishing them from charitable loans to the needy. This marked a significant shift, acknowledging that a reasonable charge for the use of capital in business transactions could be legitimate, moving away from a blanket prohibition on all interest.

Modern Christian Perspectives

Modern Christian perspectives on charging interest differentiate between predatory lending and fair compensation for capital. Many Christian traditions view charging excessive or exploitative interest, which preys on the vulnerable and leads to their deeper impoverishment, as morally unacceptable. This is often referred to as modern usury, characterized by exorbitant rates, such as those found in some payday loans. Such practices are seen as violating principles of social justice and compassion.

Conversely, reasonable interest in commercial transactions (e.g., mortgages, business loans, investments) is generally accepted as legitimate. This acceptance is based on the recognition that lenders incur costs, risks, and opportunity costs when providing capital. For instance, a bank providing a mortgage loan incurs administrative expenses, assesses the risk of default, and foregoes other potential investments for that capital, justifying an interest rate that covers these factors and provides a return on investment.

Modern Christian ethical frameworks emphasize responsible stewardship, promoting the common good, and avoiding financial exploitation. While specific interest rates are not prescribed, the ethical intent behind the loan and its impact on the borrower’s well-being are paramount considerations. This approach encourages Christians to engage in financial dealings that foster equitable economic relationships and contribute positively to society, rather than creating cycles of debt or hardship.