All praise is due to Allah, Lord of the worlds, and may peace and blessings be upon our Prophet Muhammad, and upon his family and companions.
Islam permits sale, trade, and benevolent loans, preserves the rights of both creditor and debtor, and forbids riba, injustice, and consuming people’s wealth unlawfully. With the abundance of loans, installment financing, and credit cards in our time, a Muslim needs to know the basic principles that distinguish a lawful transaction from a prohibited one.
This article presents the rulings on debts, loans, and riba in brief. As for complex banking contracts, they need their clauses to be read fully and presented to a trustworthy scholar or a specialized Shariah board, because the ruling depends on the reality of the contract and its conditions, not on the commercial name placed upon it.
A debt is a financial right established in a person’s liability for another. It may arise from a loan, a deferred price of a commodity, rent, dowry, compensation, or other causes.
Every loan creates a debt, but not every debt arises from a loan.
A loan is when a person gives money to another person so he may benefit from it, then return its equivalent of the same type and description. Its basis is assistance and kindness, not trading in the borrower’s need.
Whoever lends someone one thousand has the right to receive one thousand back, and it is not permissible for him to stipulate a financial increase or benefit for himself because of the duration of the loan.
Riba is a prohibited increase that occurs in loans and debts, or in the exchange of particular ribawi properties in a way that violates Islamic rules. One of its clearest forms is that a person lends another money and stipulates that it be repaid with an increase.
Not every loan is haram. A benevolent loan is among the doors of cooperation and kindness when the borrower returns the equivalent of what he took without a stipulated increase or benefit for the lender because of the loan.
However, a Muslim should not expand in borrowing without need or an apparent ability to repay, because debt is a right of people, and its burden remains until it is paid.
The Prophet ﷺ said:
"Whoever takes people’s wealth intending to repay it, Allah will repay on his behalf; and whoever takes it intending to destroy it, Allah will destroy him." Narrated by Al-Bukhari.
A good intention does not remove the obligation of planning repayment, but it is a great foundation; it is not permissible to take people’s wealth while intending delay or destruction.
Debt is not a light matter, and the Sunnah warns against it remaining unpaid.
The Prophet ﷺ said:
"The martyr is forgiven every sin except debt." Narrated by Muslim.
And he ﷺ said:
"The soul of the believer is suspended because of his debt until it is paid on his behalf." Narrated by At-Tirmidhi and Ibn Majah; authenticated by Al-Albani, and Shu‘ayb Al-Arna’ut graded its chain authentic.
Therefore, whoever needs to borrow should know the amount of the debt, its repayment date, and the source from which it will be paid, and he should not burden himself with what he most likely cannot repay.
Allah guided the believers to write down deferred debts, clarify their term, and have them witnessed, in order to preserve rights and prevent dispute and forgetfulness.
Allah says:
{O you who believe, when you contract a debt for a specified term, write it down. Let a scribe write between you with justice. Let no scribe refuse to write as Allah has taught him. So let him write, and let the one upon whom is the right dictate, and let him fear Allah, his Lord, and not diminish anything from it. If the one upon whom is the right is of limited understanding, weak, or unable to dictate himself, then let his guardian dictate with justice. And bring to witness two witnesses from among your men. If there are not two men, then a man and two women from those whom you accept as witnesses, so that if one of the women errs, the other can remind her. Let not the witnesses refuse when they are called. Do not tire of writing it, whether small or large, for its term. That is more just before Allah, stronger as evidence, and more likely to prevent doubt, except when it is an immediate trade that you conduct among yourselves; then there is no blame upon you if you do not write it. And take witnesses when you make a sale. Let no scribe or witness be harmed. If you do so, then it is sinful disobedience in you. Fear Allah, and Allah teaches you. Allah is Knowing of all things} [Al-Baqarah 2:282].
Practical documentation today includes:
Writing down a debt is not bad suspicion; rather, it is following the guidance of the Quran and preserving affection and rights.
The debtor must:
It is not permissible for one who is able to delay people’s rights without excuse, for the Prophet ﷺ said:
"Delay by a rich person is injustice, and if one of you is referred to a wealthy person, let him accept the referral." Agreed upon.
The meaning of delay by a rich person is that one who is able delays payment of a debt whose due date has arrived. As for the truly unable person, he has another ruling, and he may not be treated like the able procrastinator.
The creditor has the right to request his right in a proper manner, document the debt, and take lawful guarantees. But if it is established that the debtor is insolvent and unable to repay, then he must be given time until his condition becomes easy, and it is good for the creditor to forgive part or all of his right if he is able.
Allah says:
{And if someone is in hardship, then postponement until ease. But if you give in charity, it is better for you, if you only knew} [Al-Baqarah 2:280].
It is not permissible to humiliate the insolvent person, expose him, or charge him a financial increase because of delay. At the same time, it is not lawful for one who is able to pretend to be insolvent in order to consume people’s wealth.
It is not permissible for the lender to stipulate an increase, gift, service, or benefit for himself because of the loan, because a loan is a contract of assistance, and whatever benefit is stipulated in it for the lender because of the loan enters into riba.
A well-known legal maxim among jurists says: "Every loan that brings a benefit is riba." This phrase is not established as a hadith raised to the Prophet ﷺ, so it should not be attributed to him, but its meaning is correct regarding a benefit that the lender stipulates for himself because of the loan.
As for the borrower repaying the debt and adding extra from himself without a prior condition, agreement, binding custom, or collusion, this is from good repayment.
Abu Rafi‘ رضي الله عنه narrated:
"The Messenger of Allah ﷺ borrowed a young camel from a man. Camels of charity came to him, so he ordered Abu Rafi‘ to repay the man his young camel. Abu Rafi‘ returned to him and said: I did not find among them except an excellent four-year-old camel. He said: Give it to him, for the best of people are those best in repayment." Narrated by Muslim.
The difference is clear between an increase stipulated by the lender at the time of the contract, which is prohibited, and kindness done voluntarily by the borrower at repayment without condition or collusion.
Allah prohibited riba decisively and made it one of the major sins.
Allah says:
{Those who consume riba will not stand except as one stands who is being beaten by Shaytan into insanity. That is because they say: Trade is only like riba. But Allah has permitted trade and forbidden riba. Whoever receives an admonition from his Lord and stops, then he may have what has passed, and his affair is with Allah. But whoever returns, those are the companions of the Fire; they will abide therein} [Al-Baqarah 2:275].
And He says:
{O you who believe, fear Allah and give up what remains of riba, if you are believers. And if you do not, then be informed of a war from Allah and His Messenger. But if you repent, then you may have your principal; you do not wrong and you are not wronged} [Al-Baqarah 2:278-279].
Jabir رضي الله عنه said:
"The Messenger of Allah ﷺ cursed the one who consumes riba, the one who pays it, the one who writes it, and its two witnesses, and he said: They are all the same." Narrated by Muslim.
The hadith warns against directly entering into a riba contract or intentionally assisting its completion, not only against taking the prohibited increase.
This is every stipulated increase over the principal loan or debt in exchange for time, whether it is stipulated at the beginning of the contract or added when repayment is delayed.
Examples include:
The ruling is not changed by naming the increase interest, return, fee, or financing cost; what matters is the reality of the transaction.
This occurs in exchanging the ribawi properties mentioned by the Prophet ﷺ, and whatever scholars attached to them because it shares the same effective cause.
The Prophet ﷺ said:
"Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt: equal for equal, like for like, hand to hand. If these categories differ, then sell however you wish, provided it is hand to hand." Narrated by Muslim.
Among riba of sales are:
If gold is sold for gold, or a currency is sold for the same currency, equality and possession in the contract session are required. If the genus differs, such as selling dollars for euros, the amounts may differ, but immediate real or legally recognized constructive possession is required.
The stipulated increase on a bank loan is prohibited riba, whether the percentage is large or small, fixed or variable, and whether the contract is called a personal loan, mortgage, student loan, or cash financing.
If the bank gives cash to the customer on the condition that it be repaid with a guaranteed increase because of time, then this is the reality of an interest-based loan. As for sale, lease, and partnership, they have other rulings, and they do not become lawful merely by changing the name; the conditions of the lawful contract must actually be fulfilled.
Selling by installments is permissible even if the deferred price is higher than the cash price, provided that:
If the seller says before the contract: the cash price of the item is ten thousand, and the installment price is twelve thousand, then the buyer chooses one of the two prices and the sale is concluded upon it, then this is permissible in principle. But if the price remains undecided after the contract, or an increase is added because an installment is late, then it is not permissible.
It is permissible to take fees for the actual cost of loan services, such as real and regulated administrative expenses. As for what exceeds the actual cost, or is linked to the loan amount or duration in a way that produces profit for the lender from the loan, it is a prohibited increase.
Therefore, it is not enough to call interest “administrative fees”; rather, one looks at its amount, the real service it corresponds to, and the way it is calculated.
If the credit card contract includes an interest condition when repayment is delayed, it is not permissible to enter into it, even if the cardholder is determined to repay before the grace period ends, because the riba condition is part of the contract.
It is permissible to use a card that does not include a riba condition, with actual lawful fees not linked to the debt amount or duration. As for cash withdrawal from the card, it is a loan, so no benefit may result for the lender except a fixed actual service fee.
The contract itself should be read, not merely the advertisement wording or card name.
Buy now, pay later services do not all have one ruling:
Judging a particular service requires reviewing the contract and the path of the money and commodity, not the name alone.
If the customer gives his money to an institution that guarantees the principal and returns to him a specified increase or guaranteed percentage, then in reality this is a loan with an increase, and the increase is riba.
As for true Islamic investment, such as a properly structured mudarabah, it is not a guaranteed loan with a fixed return. Rather, profit is a common percentage of actual profit, while the rules of loss and guarantee are borne according to the Shariah. Therefore, calling an account “investment” is not enough to make it lawful.
Whoever entered a riba transaction must:
If he is the one taking the riba increase, such as someone whose account received interest on a deposit, then he may not benefit from the prohibited increase. If he has not received it, he should leave it. If he has received it, he removes it from his wealth and spends it on the poor or beneficial public interests to dispose of it, not as charity from pure wealth seeking reward; the purpose is to remove prohibited wealth from his ownership. As for his principal, it remains his right.
A single ruling should not be issued for every case, because ability, obligations, laws, and alternatives differ. But the mere difficulty of exiting a contract does not make riba halal. Rather, the Muslim fears Allah as much as he can and searches for the path with the least violation and least injustice.
If a Muslim dies while owing a debt, it must be paid from his estate before inheritance is distributed to the heirs. The heirs are not obligated to pay it from their own wealth if he left no money, unless they guaranteed the debt or voluntarily pay it.
Therefore, the debtor should write down his debts clearly, naming the right-holders, the amounts, and what has been paid, so they are not lost after his death.
No. Debt and loans are permissible in principle if they are free of riba, injustice, and prohibited conditions. But borrowing is a heavy responsibility, so a Muslim should not expand in it without need or ability to repay.
Yes. Not writing it down does not make the debt itself invalid, but documenting it is among the strongest guidance of the Quran in preserving rights and preventing dispute. A person should not be careless in writing the debt amount, its due date, and what has been paid, especially if it is large or long-term.
Yes. Every stipulated increase over the principal loan because of time is riba, and the ruling is not changed by whether the percentage is small or large.
The basic principle is that a permissible goal does not make a prohibited means permissible. A loan conditioned on a riba increase does not become halal because of buying a house or car or paying study fees. As for claiming necessity, it has precise conditions and is not determined merely by desire or comfort. The specific case, with its details and alternatives, should be presented to a qualified scholar.
It is not riba in itself if the contract is a real sale, the two parties choose one known deferred price at the time of contracting, and the amount of the debt does not increase afterward because of delay.
It is not permissible to stipulate a financial increase on a debt because the debtor delayed repayment, whether the delay is due to insolvency or procrastination, because it is an increase on debt in exchange for time. As for clauses that state an amount will be paid to charity, or claiming actual court expenses, these have details and contemporary resolutions, and they may not be used as a trick for the creditor to benefit or increase his debt. Therefore, the specific contract should be presented to an independent Shariah board and not judged by name alone.
The cause must be stopped and repentance made to Allah. It is not permissible to use it for personal expenses or keep it intending to benefit from it. If it has been received, it should be spent on the poor or public benefit to dispose of prohibited wealth, without counting it as zakah and without intending reward for charity with pure wealth. The original principal remains the owner’s.
If the gift is stipulated, agreed upon, or given because of the loan so that the lender benefits from it, it is not permissible. The lender should not accept a gift from the debtor during the debt period if there was no prior habit between them independent of the loan, unless he counts it from the debt or compensates him with something similar, so that it does not become a benefit brought by the loan. As for kindness at repayment without condition, agreement, or binding expectation, it is from good repayment.
Abu Burdah رحمه الله said:
"I came to Madinah and met Abdullah ibn Salam رضي الله عنه. He said: Will you not come so I can feed you sawiq and dates, and you can enter a house? Then he said: You are in a land where riba is widespread. If you have a right over a man and he gives you a load of straw, a load of barley, or a load of qat, then do not take it, for it is riba." Narrated by Al-Bukhari. Qat is a type of animal fodder.
It is permissible if the increase is a purely voluntary gift from the debtor at repayment, without prior condition, agreement, or a custom that makes it like a condition. It is not permissible for the lender to demand it or build the loan upon expecting it.
If the card contract includes an interest condition upon delay, it is not permissible to enter into it even if you think you will repay during the grace period. As for a card free of a riba condition, there is no harm in it while adhering to the rest of the Shariah guidelines.
Yes. In fact, Allah commanded giving the insolvent debtor time until ease. As for the one who is able and delays repayment without excuse, he is an unjust procrastinator.
Yes. It is permissible to document the right through collateral, guarantee, witnesses, or a written contract, provided that this is free of injustice, riba, and prohibited conditions.
Yes. Allah made those in debt among the categories eligible for zakah, if the debt was for a permissible matter, the debtor is unable to repay, and the remaining conditions of eligibility are fulfilled. Allah says:
{Zakah expenditures are only for the poor, the needy, those employed to collect it, those whose hearts are to be reconciled, freeing slaves, those in debt, in the cause of Allah, and the traveler; an obligation from Allah. Allah is Knowing and Wise} [At-Tawbah 9:60].
The method of paying the debtor or his creditor differs according to his situation and ensuring that the zakah reaches its proper category, so specific cases should be referred to a trustworthy zakah body or qualified scholar.
The debt is paid first from the deceased’s estate before inheritance is distributed. His family is not obligated to pay it from their own wealth if he did not leave enough, unless they guaranteed it, but their voluntary payment is kindness to the deceased and to the right-holders.
A contract is not judged by its name alone. It may be a sale, lease, or partnership that fulfills the conditions, or it may be a riba loan whose terms were changed, or a contract that is basically valid may contain a prohibited condition. Therefore, the reality of the transaction and its clauses must be reviewed.
It is permissible to borrow from a Muslim or non-Muslim if the contract is free of riba and prohibited conditions, while fulfilling the right and honoring the agreement remains obligatory.
The Shariah came to preserve wealth and establish justice and kindness. It permitted sale and benevolent loans, commanded writing down debts and fulfilling them, gave respite to the insolvent, and prohibited riba and exploiting people’s needs.
A Muslim should beware of signing a contract he does not understand, and he should know that changing names does not change realities. If a transaction is unclear to him, he should ask before committing to it, because asking the people of knowledge before the contract is easier than trying to exit it after debts and rights have already resulted.
This article is a general brief explanation, not a fatwa on a specific contract. Banking and financing contracts differ in their conditions and effects, and specific cases need trustworthy Shariah and legal review.
