Interest On Loans Prohibited?
Q. I am a 20-year-old Catholic from the United Kingdom who happened to stumble on your "Ask a Priest" page, and I am hoping that you can answer my question. I have always heard that usury is a sin, but I'm not sure exactly what usury is. Is it any interest on a loan or just an excessively high interest rate (more than just to cover the cost of handling the loan)? And if charging interest is a sin, can a Catholic morally take out loans which have interest, such as mortgages or student loans -- or even own a bank account which pays a small amount of interest? (London)
A. In modern times, usury is thought of as exploiting the poor by lending money at an exorbitant rate of interest. But for the first 1,500 years of the church, it was taken to mean charging any interest at all and was generally condemned by church fathers, popes and councils. The history of how the current position evolved is a long and complicated one, and conflicting statements can sometimes be found.
In the Gospel of Luke (Lk 6:35), Jesus says, "Love your enemies and do good to them, and lend expecting nothing back." Situated in the passage on the Beatitudes, this would seem to be an appeal for Christian generosity rather than a proclamation on the intrinsic immorality of interest-taking.
In fact, in the parable of the talents, Jesus criticizes the "lazy" servant for failing to invest his money where it could have borne interest (Mt 25:14-30).
In the largely agrarian society of medieval Europe, lending money involved the few rich people making loans to their dirt-poor neighbors for basic needs such as food or winter clothing. In such circumstances, it was thought to be wrong to profit from another's distress.
By the year 1515, though, usury had acquired a more nuanced definition, as stated by the Fifth Lateran Council: "That is the real meaning of usury: 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."
Moralists were slowly beginning to see that the borrower could legitimately be charged for the opportunity foregone by the lender to use the money himself and also for the risk that the lender might never get his money back.
So, to sum up, charging a moderate rate of interest is permitted by the church. Mortgages and students loans meet the test, as does gaining interest on a bank deposit.
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Questions may be sent to Father Kenneth Doyle at askfatherdoyle@gmail.com and 40 Hopewell St. Albany, N.Y. 12208.
