A person should only lend money to a person in front of
witnesses even if he is a talmid chochom and yiras Shamayim. He
may feel confident that the talmid chochom would not deny receiving the
loan, but he cannot be sure that, busy as he is, the talmid chochom will
not forget the loan. A person who lends money without witnesses violates the
prohibition of placing a stumbling block before the blind. And in any case,
the borrower should sign a document attesting to the loan. (People tend to be
lenient in this matter and the poskim have discussed at length why that might
be so.) There are some who make a distinction between short term loans, in
which it is permitted to be lenient, and long term loans in which it is
forbidden to be lenient. In any case, it is fitting to fulfill this din of
Chazal, as the Shulchan Orach requires, with at least a document attesting to
the loan and signed by the borrower, for it benefits both the lender and the
borrower. It is especially important for a person who borrows from time to
time and sometimes pays off the loan or part of the loan before it is due, for
the borrower is likely to remember that he repaid the loan, but the lender is
liable to forget.
When the borrower repays part of the loan, the lender must
return the document signed by the lender for the full value of the loan and
prepare a new document for the sum remaining to be repaid. The lender is not
required to return the original document if he gives the lender a receipt for
the amount he has repaid.
If, when the time comes to repay the loan, the lender says
that he lost the document which attests to the loan, the borrower may not say
that he will not repay the loan until the lender produces the document. The
borrower must repay the loan and the lender must give him a receipt. If the
lender says that he does not have the document which attests to the loan at
hand because it is somewhere else, the borrower is not required to repay the
loan until the lender is prepared to return the document to him.
It is forbidden to make excuses to avoid repaying a loan in
order to compel the lender to accept partial payment and relinquish the rest.
A person who does that remains accountable to Shamayim until he pays
off the loan in its entirety. And certainly he must not repay the loan with a
check which will not be honored by the bank, or hide from the lender so that
the lender is required to search him out and waste time and energy trying to
recover the money he lent. On the contrary, the borrower is required to seek
the lender out and repay him if he is in the same city.