Please don’t eat my car
June 13, 2018 § 33 Comments
I understand and appreciate the point – the lender merely gets the borrower’s pledge. The borrower gets the thing.
But it is unsatisfying that it is necessary to introduce idiosyncratic usages of very well-defined words. Nobody ever says that a lender “sells” the “loan”. Selling is something quite distinct from lending.
Like many words the English word “loan” is multivocal: it has several distinct meanings. I’ll point out two of them in this post.
In one sense of the term, I loan you my car to drive for a while since your car is in the shop. The term “loan” here means that I retain ownership of my car while you use it: you are obligated to return that actual car to me when you are finished using it. Because you are using my car, it is morally licit for me to make a profit – charge you rent – for your use of my car.
In a different sense of the term, I loan you some flour to bake into bread and eat. The term “loan” here means that you now own that actual flour, and have personally pledged to pay me for it later with different flour. (This is the kind of “loan” which is meant by the Latin term “mutuum“). As a mutuum lender I no longer own that actual flour, you do: I have agreed that you may dispose of that actual flour however you wish. Furthermore, you have not pledged any collateral: you have not sold me an interest in any specific itemized actual property that you do own: all you have given me is a pledge, not ownership of any thing. In virtue of the agreement itself I now own nothing, I simply have your promise that you will pay me for what you have purchased within some agreed time.
So it is morally illicit for me to make a profit on your use of that actual flour: if I attempt to do so I am attempting to charge you rent for the use of something which I do not own. Charging rent for the use of property I do not own is intrinsically unjust. I do not own the flour any longer once I have given it to you under a mutuum: if I did, then when you bake and eat the bread you would be stealing from me, as if you had sold the car that I lent to you in the other example.
If it is always intrinsically immoral to make a profit from this kind of lending, then why would anyone lend in this specific manner? Out of friendship or charity, of course, and in pursuit of the common good.
But it is never morally licit to lend under a mutuum out of financial self interest.