A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money but to avoid a loss. it may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained. But the lender cannot enter an agreement for compensation, through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having.
- St Thomas Aquinas Summa Theologica Secunda Secunda Q78 A2
I’m sure that some readers are surprised on all the ways you can’t make money on a loan, so lets talk about the way’s that you can.
Basically, it comes down to anything that is not the loan in and of itself.
So, as the quote says. If you have to sell something at a loss to raise the money, you can ask for that back - technically that is not making profit but you could have some good reason to sell something at a loss for tax reasons. Note that, losses cannot be potential losses, as in what you could have potentially done with the money instead to gain money. Because you could just as easily have lost money as gained it, of which there is no way to know. Until things come into being, become actualized, one cannot charge for them or make money upon them.
If you want to do something else with your money, do that instead. Don’t make the borrower feel guilty.
You can be compensated for any labor required to deliver the thing loaned. In the days of golden money, you could ask for compensation for the delivery of the coins. Compensation to pay the guards if it was a large enough sum. If you run a merchant business, compensation for the accountants to keep track of the loans. Possibly fees to cover safety of where you would store whatever is loaned, etc.
Though, keep in mind, some of these apply only if you run a business, and these fees would need to be dispersed among all borrowers. I don’t know whether it would be more moral to do a flat rate among all of them, or have the ones borrowing more pay the higher amount. I can make moral claims to either. However, it can’t be denied that the money made is simply to cover the business expenses and then compensate you as the business owner for the your labor in running the business. Not in a interest on the loans lent out.
As briefly stated in Are Loans Rent? - one can set up different ways to structure home purchases than we currently have. Leasing with option to buy is certainly one way - where the renter has a part of his rent go towards the option and pay down the mortgage. When properly structured, at fair rates, such options seem much more reasonable for all involved. Rent to own, on the other hand, has always seemed more predatory and ‘loanish’ to me - though I encourage readers to speak up if they have direct experience rather than just talking with the people and calculating the rates the interest would be if it was a loan. I’ll be honest I was so appalled at the numbers I never got to reading the fine print to see the terms.
Business loans, as discussed, should always be paid out of profits. Honestly, this seems like a much better system then the current legal system, where the Supreme Court ruled that stock holders (supposed legal owners) of companies are not entitled to dividends. Instead, you only get money if “number go up” as all the hip kids say. Bonds seem to be the replacement for a particular venture of a company’s investment, instead investing in particular amount of years of their debt. Away with such nonsense! Give us your profits! BE PROFITABLE!
Imagine if we demanded this of government? If t-bills were paid only out of excess taxes for particular years? Bonds out of particular ventures (studies, experiments, etc) that the government embarked upon?
Again, BE PROFITABLE.
Don’t waste tax payer money.
And trust me, I have an extremely loose and anti-libertarian idea of what it means to waste tax payer money. I simply want accountability, and people to be fired, and run up flag poles, never to be employed again, for ruining lives.
So, those are the ways I have been able to find to make money off loans. If anyone has found others, please let us know in the comments! The basic rule is - anything but the act of the loan itself, which means the money (which has been consumed).
Anything else is fair game, though may still run into moral quandaries.
Now, having traveled far, the next few posts will take it closer to home.
In the third place, those who desire to keep themselves free and untouched by the contamination of usury and to give their money to another in such a manner that they may receive only legitimate gain should be admonished to make a contract beforehand. In the contract they should explain the conditions and what gain they expect from their money. This will not only greatly help to avoid concern and anxiety, but will also confirm the contract in the realm of public business. This approach also closes the door on controversies-which have arisen more than once-since it clarifies whether the money, which has been loaned without apparent interest, may actually contain concealed usury.
- Pope Benedict XIV Vix Pervenit - On Usury and Other Dishonest Profits