The Gold Lender Of Babylon

Rodan, the spear maker of Babylon, suddenly had 50 pieces of gold. He never had so much gold in his life before at his disposal. Suddenly, he had the chance to fulfill all his desires, but there was a problem. Rodan was not sure about how to use this gold. This is why Rodan decided to visit Mathon, the gold lender of Babylon, and sought his advice.

Mathon then advised Rodan that he can lend his gold and ask for interest in return. Interest is the monetary charge that a lender receives when he lends his money. Rodan will generate profits as people will repay him the principal as well as the interest.

Mathon provides some rules on how to lend money:

Do not lend your money to someone who cannot repay it to you.
Each time you lend, take a token, i.e., a down payment and a collateral. The person who took the loan may not pay you back, in that case, sell the collateral and regain your principal.
Safest are those loans where the collateral’s value is more than the value of the loan. This concept is known as overcollateralization today.
People who have a regular source of income are good candidates for giving a loan.
We should not lend to people who don't have a source of income unless a credible 3rd party guarantees to repay the loan in the event of default.
We should not lend our money to people who are very emotional and make bad choices in matters of money.

Money shouldn’t be sitting idle in your house, but it shouldn’t be invested in a high-risk venture also.