LOANS AND DEBTS
A loan is a contract which consists of assigning ownership of some wealth to another who has agreed to return it.
A debt is any liability that one has taken on, whether it is by contract – like a deferred dowry – or without a contract, such as compensation for negligent damage of entrusted property.
Ruling 502: The same conditions apply in contracts of loans that apply in all other contracts, such as the competence of both parties in terms of adulthood and sanity, as well as there being no obstacles in the disposal of one’s wealth and there being no compulsion.
Ruling 503: It is necessary in order for the contract to be completed – and for the ownership of the loan to pass to the debtor – that the loaned amount be received by the debtor. Once this has happened, the contract becomes binding and neither party can withdraw.
Ruling 504: The contract of loan is applicable in respect to items such as money, gold or grains, those which can be replaced by an equal amount of similar money, gold or grain. As for items those values are determined by their distinct characteristics, such as hand-made products and animals, they can be loaned provided that their like are easily available. If they are not easily available, it will be considered as a sale if the conditions of sale are fulfilled, as mentioned in detailed books of Islamic law.
Ruling 505: It is disliked to take a loan while one does not need it, whereas it is recommended to loan to a believer.
Ruling 506: It is obligatory to have the intention of returning the loan when receiving it.
Ruling 507: It is not permissible to stipulate an increase for the creditor, whatever it may be, as it is prohibited interest.
Ruling 508: In regards to interest, what is prohibited is that there is a condition of something extra in a loan. The opposite is permissible, e.g. giving an item to somebody with the condition that he gives a loan.
Ruling 509: If the loan repayment – rather, the repayment of any debt – has become due, it cannot be deferred in exchange for increasing the sum owed.
Ruling 510: If a debt is not deferred, it is obligatory upon the debtor to pay the debt when the creditor requests it, or when there are signs that the creditor is not agreeable with the delay. If there is no provision in the agreement to defer the payment, the debtor should not defer the payment of an overdue debt, even if the creditor is agreeable to it. However, it is not obligatory to rush in paying it as long as the creditor accepts the delay.
Ruling 511: If the debtor has not paid a debt whose payment is due, while he was able to do so, it is permissible to demand the payment from him. If he refuses to pay, he can be forced to do so, even if this means raising the case to the courts of the land as a final resort. However, if it is possible to recover the debt through the hakim shar’i, then it is not permissible to refer to the courts.
If it is difficult for the debtor to make this payment, it is obligatory to give him respite; in fact, it is recommended for the creditor to abandon his right or part of it.
Ruling 512: If the debtor wishes to pay the debt whose payment is now due, it is obligatory for the creditor to accept it. If he refuses to take it, it is permissible to force him to do so. Failing this, one can turn over the debt to the hakim shar’i and he will become free from any liability in this debt.
Ruling 513: In order to repay the debt, it is obligatory on the debtor to earn the money, if it is appropriate for him in respect to his circumstances. However, it is not obligatory to seek gifts and charity. For him to be obliged to pay the debt, it is sufficient that he has some property that he does not need, and it is obligatory to sell it in order to pay the debt, even for less than its value, as long as the difference is not great or harmful for him.
Ruling 514: If the debtor dies, the debt becomes attached to his estate, with priority ahead of his will; any agreement of deferment will also be annulled, so his heirs cannot delay the payment.
Ruling 515: If the debtor cannot get hold of the creditor or anybody who represents him, in order to pay the debt, it is obligatory on him to make a firm intention to pay off the debt whenever possible, and to make a will in respect to the debt, and continuous endeavour to get hold of the creditor as much as possible, however long this may take. His liability will not be cleared if he pays the debt off to a charitable cause (as sadaqah) on behalf of the creditor.
Ruling 516: If the creditor disappears and there is no news of him, then if the debtor knows of his death, he should pay the debt to his heirs. If he is not sure of his death while it is a possibility, he will pay the debt to the heirs after four years of searching, or after ten years without searching.
Ruling 517: It is recommended to pay off the debts of one’s parents, especially after their death; it is also recommended to absolve the debt of a believer, whether he is alive or dead.