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Lesson Loan
Allah has divided the livelihood among the people with His justice and wisdom. There are among them those who are rich and poor, the able and the needy, and it became customary for people to borrow from each other so that would help them to fulfill their needs. Since the legislation of Allah is complete and comprehensive, it has laid down several rulings related to loans. Allah singled out loans with the longest verse in the Quran, which is verse 282 of Surat Al-Baqara, and it is called the verse of Debt.
Definition of Debt
To give money to someone so they can benefit from it and pay it back later.
The Ruling of Loans
The loan is recommended for the one lending it and permissible for the borrower. Borrowing is not disliked because the borrower takes the money to benefit from it by fulfilling his needs and then pays it back.
If the loan benefits the lender, then it is usury, which is forbidden; in other words, he is lending someone money to get extra back. Likewise, if another contract is added to the loan, such as a sale of something, it is also forbidden, as it is not permissible to join the giving of an advance and the sale of something into a single contract.
Islam permits loans because of its kindness to people, facilitating their affairs, relieving their anguish, and consoling the needy. Moreover, it is one of the ways a lender can draw closer to Allah; the more severe the need of those to whom he is lending, the greater the reward.
Documenting the loan - small or large - is recommended by writing it down and having it witnessed. The amount, type, and term are written, so it is preserved, and the lender can have peace of mind that his right will not be lost or forgotten or denied, etc. Allah says: (O believers! When you contract a loan for a fixed period of time, commit it to writing. Let the scribe maintain justice between the parties. The scribe should not refuse to write as Allah has taught them to write. They will write what the debtor dictates, bearing Allah in mind and not defrauding the debt.) [Al-Baqara:282] And He says in the same verse: (You must not be against writing ˹contracts˺ for a fixed period—whether the sum is small or great. This is more just ˹for you˺ in the sight of Allah, and more convenient to establish evidence and remove doubts) [Al-Baqara:282]
Terms for the Validity of Loans
Whoever borrows money from someone else must resolve to pay it back, and it is forbidden for a person to take people’s money without intending to return it to them, so if the time comes to pay the debt, he must return it. Abu Hurairah (may Allah be pleased with him) reported that the Prophet ﷺ said: «Whoever takes people’s money intending to pay it back, Allah will pay it on his behalf, and whoever takes it intending to spoil it, Allah will destroy him.» (Bukhari 2387)
The Circumstances of the one in Debt When Repayment is Due
Ruling on Depositing Money in Banks
It is not permissible to stipulate that a fine be imposed on the debtor if he is late paying on time because it is usury. It is not permissible to borrow with the existence of this condition, even if the borrower thinks that he can pay back on time without the fine being imposed on him because it is entering into a contract in which there is a commitment to usury.
Giving Extra when Repaying the Loan
Kindness in repaying the loan - as if he lends him something and he repays it better than it, or greater than it, or more than it - is desirable if it is not a condition; Because this is showing good judgment and noble manners. If, however, it is conditional, then it is forbidden usury.
