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.