It's a Gift!
When may a borrower give a gift while repaying the loan?
Background
1. It is biblically forbidden for the borrower/lender to arrange to gift the lender on account of the loan, from the onset of the loan or while filing for an extension of the loan term. Beis Din will compel the lender to return the gift.
2. Gifting the lender together with the payment without having prearranged to do so constitutes rabbinic avak ribbis. It is the lender's moral responsibility to return the gift. Beis Din will not interfere.
3. Gifting the lender while the loan is still unpaid (not pre-arranged), according to Sha"ch constitutes rabbinic avak ribbis. It is the lender's moral responsibility to return the gift. Beis Din will not interfere.
4. Gifting the lender shortly after the loan was paid could constitute rabbinic ribbis me'ucheres. While it may not be done, there is no moral responsibility for the lender to return it.
May the borrower claim that the gift is not because of the loan?
Generally we do not trust that the borrower is being honest with him/herself. More often than not, at least subconsciously the sudden motivation to gift one's lender is a means of placating the borrower's feelings of subservience generated by the lender having extended the borrower credit. Thus, it is generally forbidden to pay interest on a loan even if the borrower were to claim that it was just a gift.
Are there times when circumstances indicate that the gift was indeed genuine and not because of the loan?
Would a gift under such conditions be permissible?
Yes and No.
I. Let us begin with gifts given while the loan is outstanding.
Note: More leniencies exist when the gifts are being given before the loan is paid than while the loan is being paid.
[1. Minute gifts which are generally deemed insignificant like returning a loaf of bread which is a slightly larger than the one borrowed are permitted. This is true even while paying back the loan as well. But of course, the reason for gifting the slightly larger loaf cannot be because of the loan [Y.D. 162: Rema 1].
]יֵשׁ מִי שֶׁאוֹמֵר, דְּמֻתָּר לִלְוֹת כִּכַּר לֶחֶם בְּכִכַּר לֶחֶם, כְּמַטְבֵּעַ שֶׁל כֶּסֶף, דְּמֵאַחַר דְּדָבָר מֻעָט הוּא, לֹא קָפְדֵיבְּנֵי אָדָם לַהֲדָדֵי בָּזֶה.
2. Patterns of giving and taking of medium size gifts among friends irrespective of outstanding loans indicate that even while outstanding loans exist between them, the gifts are due to the friendship and not the loan per se' [Sh"ach Y.D 166:1] .
אבל להשאילו כליו או בהמתו וכי האי גוונא מותר אםהיה משאילו בלאו הכי
3. However, unreasonably significant gifts (which are public in nature) can pose two potential issues and as a result are generally prohibited to transfer while outstanding loans exist between friends.
Examples include but are not limited to the borrower allowing the lender to live rent-free in the borrower's home.
1) With regards to unreasonably significant gifts, there is no pre-existing pattern of gifting between the two parties. There is reason to believe that the present loan is the underlying motivation for the significant gift.
2) Even if the significant gift is legitimately due to the friendship rather than the loan, it raises the eyebrows of onlookers. It appears to the public who may not be aware of the relationship between the two, that a gift (which is public in nature) was given because of a loan between the two.
As such, when there is a publicly known positive relationship (i.e. parents, grandparents, children) between the borrower and the lender and there is a pattern of giving significantly, we can trust that the motivation for the gift is not due to the loan, but due to the relationship and there is no risk as well in other's misunderstanding the motivation.
Thus, under such circumstances a significant gift may be given while the loan is still unpaid, provided that the motive indeed is not because of the loan.
As we will see below, this is not the case when gifting together with payment of the loan.
(Note: Rosh and Maharshal differ when there is a pattern of giving but not everyone is aware of the relationship.)
II. Gifts at the time of Payment
