Rules of Borrowing (Loans)
To give loan is Mustahab, on which great stress has been laid in the Holy Quran. The Holy Prophet (SWA) has been reported to have said that whoever gives loan to his Muslim brother, his wealth flourishes, and the agents invoke Divine mercy for him, and if he is lenient with his debtor, he will pass over the Bridge (Sirat) swiftly. And if a Muslim denies his brethren-in-faith a loan, Paradise becomes forbidden for him. Also, it has been reported that reward (Thawab) of giving alms (Sadaqa) is ten times more than its original level, and reward of giving loan is 18 times more than that level.
2373. It is not necessary to recite a specific formula in the matter of debt. If a person gives something to another person with the intention of loaning, and the other takes it with the intention of borrowing, that conduct will be in order.
2374. If it is stated that the debt should be paid at a fixed time, then creditor is not obliged to do it before that time, but if the fixing of time is only for helping debtor, then even if it is paid before that time, it should be accepted.
2375. If a period is fixed for the repayment of debt in the formal contract of debt by the debtor, or by mutual agreement, the creditor cannot claim repayment of the debt before the expiry of that period. But if it was stipulated by the creditor, or if no such period was fixed, the creditor can demand the repayment of his debt at any time.
2376. When the creditor demands his debt, and the debtor is in a position to pay it, he should pay it immediately, and if he delays its payment, he commits a sin.
2377. If the debtor does not possess anything other than the house he occupies, the household effects, and other things of essential needs, without which he would be facing hardship, the creditor cannot claim the repayment from him. He should wait till the debtor is in a position to repay the debt.
2378. If a person is indebted and he is unable to repay his debt, he should take up a suitable employment if he can, and pay off his debt.
2379. If a person has no access to his creditor, and does not hope to find him or his heirs, he should pay the amount he owes to poor on behalf of the creditor, and should obtain permission for it from the Mujtahid. And if his creditor is not a Sayyid, the obligatory precaution is that he should not give the sum he owes to a poor who is a Sayyid.
2380. If the estate of a dead person does not exceed the obligatory expenses of his Kafan, burial and the payment of his debt, his estate should be utilized for these purposes and his heir will not inherit anything.
2381. If a person takes a quantity of gold and silver currency as a loan, and then its price falls, it will be sufficient if he gives the same quantity, which he had taken. And if its price rises, he must give the same quantity, which he had taken. However, in either case, there is no objection if the debtor and the creditor mutually agree to some other arrangement.
2382. If the property taken on loan has not perished, and its owner demands it, the recommended precaution is that the debtor should return him the same property.
2383. If a person, who advances a loan, makes a condition that he will take back more than what he gives, for example, he gives 3 kilos of wheat and stipulates that he will take back 3½ kilos of wheat, or gives ten eggs and says that he will take back eleven eggs, it will be usury and therefore Haraam. Rather, if he stipulates that the debtor should, apart from the repayment, do some work for him, or repay the loan along with a quantity of another commodity, for example, if he lays down the condition that the debtor will return one Toman owed along with a match box it will be usury and Haraam. Also, if he stipulates that the debtor will return the thing loaned to him in a particular shape, e.g. if he gives him a quantity of gold, and imposes the condition that he will take it back as golden ornaments, that too, is usury and Haraam. However, if no condition is made by the creditor, and the debtor himself decides to repay something more than what he borrowed, there is no harm in it. In fact, it is Mustahab to do son.
2384. To pay interest is Haraam, the same way as charging interest. However, if a person takes a loan against interest, he does not become its owner, and he should not exercise his right of disposal over it. And if it is known that the creditor would have allowed him the use of money loaned, even if they would not have agreed on interest, then the debtor can exercise his discretion over the money loaned to him without any objection.
2385. If a person takes interest bearing loan in the shape of wheat or any other similar thing, and does farming with it, he becomes the owner of the harvest, but it is better that he should not exercise his right of disposal over harvest so acquired.
2386. If one buys a dress on credit, and later pays the price with a money earned from interest, or a Halal money, which is mixed with interest, then if had this intention in the that dress is not correct and praying with it is void, as a precaution. But, if he had no such intention in that time, it is correct to wear the dress and pray with it, and if one has money earned from interest or mixed with Haraam, and he says to the seller the I buy this dress with such money, wearing it is Haraam, and if he knows this issue, offering prayer in it is void, as an obligatory precaution.
2387. If a person gives a sum of money to a merchant, so that he may get from him something less in another city, there is no harm in it. It is called Sarf-I-Barat. It is like giving up part of debt. The same applies if one gives a sum of money to another person and makes a condition to get it in some other city.
2388. If a person gives some money to another person with the condition that after a few days, he will take a larger amount from him in another city, or town, for example he gives 990 to him, and stipulates that after ten days he will take 1000 from him in another city, the transaction is usury which is Haraam. However, if the person who is taking more amounts gives some commodity against the excess amount or performs some task, there is no harm in this arrangement.
2389. If a person is owed by someone, and the thing owed is not in the category of measured or weighed, he can sell it to the debtor or anybody else for a lesser amount and realize the sum in cash. On this basis, in the present times, a creditor can sell the bills of exchange or the promissory notes received from the debtor, to the bank, or any other person, at a price lower than the amount due to him and can take the outstanding balance in cash, because dealings with regard to common bank notes is not by weight or measure.