Doing Favors for the Lender in Lieu of Interest

The Rambam (Rabbi Moshe Maimonides, Spain-Egypt, 1135-1204), in Hilchot Malveh Ve'loveh (5:12), establishes that the Torah prohibition of Ri'bitt, which forbids taking interest on loans from a fellow Jew, includes demanding favors from the borrower as a condition on the loan. Not only may the lender not demand that the borrower pay money or valuables in exchange for the loan, he may also not demand that he perform favors, such as studying Torah with him. Since the borrower does the favor as compensation for the time he was allowed to retain the lender's money, this arrangement constitutes Ri'bitt and is forbidden.

This Halacha applies even if the borrower customarily studied with the lender before the loan was given. Since the lender specifically stipulated that the loan is granted on condition that the borrower continues studying with him, this constitutes Ri'bitt, despite the fact that the borrower in any event had been regularly studying with the lender. Rabbi Moshe Halevi (Israel, 1961-2001) codifies this Halacha in his work Milveh Hashem (p. 307).

Summary: The prohibition against receiving or paying interest includes not only monetary interest payments, but also doing favors for the lender. Even if the borrower regularly did a certain favor for the lender before receiving the loan, the lender may not stipulate that he gives the loan on condition that the borrower continues providing the given service.