Q: Someone mentioned that it is prohibited to lend without witnesses. Is this true?

A: The Gemara (B.M. 75b) teaches that one who lends without witnesses violates lifnei iver and brings curses upon himself. This is because the borrower is liable to deny the loan, and then people may suspect the lender of claiming money falsely. Ravina was careful even when lending to a colleague talmid chacham, who is not suspected of lying, because he might forget having borrowed due to his many responsibilities (C.M. 70:1).

A loan document is best, as it clearly states the amount of the loan and also indicates that the loan hasn’t been repaid (SM”A 70:4).

A number of authorities seek to justify the practice of many people to lend without evidence. Aruch Hashulchan (70:1) suggests that the two know and trust one another; the lender is sure that the borrower will neither forget nor deny. Others suggest that the halacha applies only to one who lends money on a regular basis. Some are lenient for short-term loans or small sums, where concerns are less serious.

It is still preferable, though, to obtain some evidence, especially for large sums or long-term loans.