I agree that he is insecure because he owes you money and looking for excuse to not pay back by instigating problems.
Literally saying fuck you and your money to make him feel better about dissing his responsibility.
I had a room mate like that once, was obsess with my cock size, and obsess with showing his at any party in front of everyone saying how big it was. I eventually moved out, because normal behavior doesn't warrant that type of conversation with sane people.
I'm curious if this is the SPH in reverse, as some people get off in doing the humiliation to others. I think smart people ignore silly barbs of humiliation unless warranted in self defense. Let him be an asshole, it just makes you look better.
I don't know if you have a small penis, but I do know that you are a better gentlemen than he is for the kindness of loaning him money and the means to do that by working for it. I would say next to a big dick like him, everyone penis is smaller! He is by far the biggest dick in the room, while you only carry one!