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Suppose someone asks his friend for a loan and he says "sure, no problem, but there is interest that comes along with that". Later, the borrower repays just the principal and says "the Torah forbids interest so I am paying only the principal back; even though I agreed initially to interest, I just said it so you would give me the loan".

Is there an halachic obligation to pay the interest? (The lender can claim he would have wrote up a heter iska agreement instead.)

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The lender may not collect the interest. (Source: Yore Dea 161:11; Rabbi Yisroel Reisman, The Laws of Ribbis, 2:26.) If the borrower wishes to repay it, he may not. (Source: YD 160:4; TLOR 2:5.) If this is relevant to you, consult your rabbi, as the particular circumstances of your case may possibly yield a different ruling.

However, it was also forbidden for the borrower to agree to such terms from the outset, both because laws of interest-taking forbid it and, if he did it with intent to deceive, because of the deceit. (Source: TLOR 2:fn17.)

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What if the lender is a Goy, is this halachah still applicable? –  Noach mi Frankfurt Jan 24 at 14:51
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@NoachmiFrankfurt, No. But feel free to make a question of it to get the sources, etc. –  Yishai Jan 24 at 17:50

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