Is it sinful to charge interest on a loan?
It might initially seem like little is at stake, but interest is an issue of human dignity.
Let’s say I take out a mortgage to buy a home, most likely from a very large bank, on which I am charged interest. Or maybe I loan a friend money to start her own business. Once her venture succeeds, she pays me back what she borrowed, plus a 10 percent return as a gesture of thanks. Are either of these situations sinful?
The answer is not clear. On the one hand, the Old Testament condemns the practice of charging interest because a loan should be an act of compassion and taking care of one’s neighbor. As such, making a profit off a loan is exploiting that person and dishonoring God’s covenant (Exodus 22:25–27). St. Thomas Aquinas agrees; in Summa Theologica he uses the term usury and argues that interest is inherently unjust and one who charges interest sins. He writes, “To take [interest] for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.” In Dante’s Inferno, usurers were condemned to the seventh circle of hell, a place reserved for those who did violence against God.
On the other hand, the Fifth Lateran Council in 1517 reversed earlier prohibitions against charging interest on loans, and current Catholic teaching mostly avoids the topic. In the most recent edition of the Catechism of the Catholic Church, the only mentions of it are in regard to global economic exploitation that leads to homicide and a vague reference to the problem of ignoring the Old Testament command to waive all debts once every seven years.
It might initially seem like little is at stake when it comes to interest, but this is an issue of human dignity. A person is made in God’s own image and therefore may never be treated as a thing. Interest can diminish the human person to a thing to be manipulated for money.
In an article for The Catholic Worker, Dorothy Day articulated this well: “Can I talk about the people living off usury . . . not knowing the way that their infertile money has bred more money by wise investment in God knows what devilish nerve gas, drugs, napalm, missiles, or vanities, when housing and employment . . . for the poor were needed, and money could have been invested there?” Her thoughts were a precursor to what Pope Francis now calls an “economy that kills.”
To sin is to say “no” to God and God’s presence by harming others, ourselves, or all of creation. Charging interest is indeed sinful when doing so takes advantage of a person in need as well as when it means investing in corporations involved in the harming of God’s creatures.
This article appears in the April 2016 issue of U.S. Catholic (Vol. 81, No. 4, page 49).