All You Need to Know About Loans and Debt in Islamic Law

Loans and debt are two different things in Islam that you should know. In Islamic law, there is no prohibition to get any loans and debt as long as it followed by Islamic Syariah. That is why you need to be careful before take any decision to get some loans or debt to support your online business from Islam perspective.

Loans in Islamic law have the form as the Qard and Dayn. They relate to giving and taking loans which including other parties, commonly the bank to get the loan settled with or without any interest in it. The Qard will provide some interest, while the Dayn will not give you any interest until you paid off your loan.

Debt in the Islamic way is about lending something to another. It can be money, properties, or anything that can be used for the borrower. The debt should be paid off by the borrower as much as they owe you as the principle of economy in Islam.

The borrower and the lender can be your friend, family member, or neighbor without including other parties such as the bank company.

Here we have some rules you should know about loans and debt in Islamic law. Remember that both of them can cause you trouble if you take them but not responsibly pay them back.

1. Avoid Unnecessary Needs

Before you decide to take a loan or debt, think carefully it is for good or just to fulfill your unnecessary needs. Both loan and debt should be paid off and it becomes sone of the ticket to get you to Jannah if you settled them properly.

On the Quran surah, Ali Imran verse 14 mentions about this human needs that unnecessary to avoid Jannah.

زُيِّنَ لِلنَّاسِ حُبُّ الشَّهَوٰتِ مِنَ النِّسَاۤءِ وَالْبَنِيْنَ وَالْقَنَاطِيْرِ الْمُقَنْطَرَةِ مِنَ الذَّهَبِ وَالْفِضَّةِ وَالْخَيْلِ الْمُسَوَّمَةِ وَالْاَنْعَامِ وَالْحَرْثِ ۗ ذٰلِكَ مَتَاعُ الْحَيٰوةِ الدُّنْيَا ۗوَاللّٰهُ عِنْدَهٗ حُسْنُ الْمَاٰبِ – ١٤

“Made to feel beautiful in the eyes of human love for what is desired, in the form of women, children, property that is piled up in the form of gold and silver, selected horses, farm animals and rice fields. That is the pleasure of life on earth, and with Allah is a good place to return.” (QS 3 :14)

2. Avoid The Over-Indebtedness

Over-indebtedness will only harm you in so many ways. That is why you should be careful before taking any decision into loan or debt. You will only get so much trouble if you try to live above your means. You will get an uncertain income because you have to pay back your loan or debt.

On the Quran surah As Syura verse 30 mentions about this.

وَمَآ اَصَابَكُمْ مِّنْ مُّصِيْبَةٍ فَبِمَا كَسَبَتْ اَيْدِيْكُمْ وَيَعْفُوْا عَنْ كَثِيْرٍۗ – ٣٠

“And whatever calamity befalls you is caused by the deeds of your own hands, and Allah forgives many (of your mistakes).” (QS 42:30)

3. Stop being Extravagant

Living in an extravagant life will just get you in so much trouble as the bad effects of the loan in Islam. Having loans and debts may help you to live with it, but it will harm you the other day if you are not responsible for them.

Allah doesn’t love them who live in an extravagant such as mentions on the Quran surah Al Isra verses 26-27.

وَاٰتِ ذَا الْقُرْبٰى حَقَّهٗ وَالْمِسْكِيْنَ وَابْنَ السَّبِيْلِ وَلَا تُبَذِّرْ تَبْذِيْرًا – ٢٦

اِنَّ الْمُبَذِّرِيْنَ كَانُوْٓا اِخْوَانَ الشَّيٰطِيْنِ ۗوَكَانَ الشَّيْطٰنُ لِرَبِّهٖ كَفُوْرًا – ٢٧

“And give their rights to close relatives, also to the poor and those who are on their way; and do not waste (your wealth) wastefully. Surely the people who are spender are Satan’s brothers and Satan is very disbeliever to his Lord.” (QS 17:26-27)

4. Prompt The Repayment As Soon As Possible

If you already having some loan and debt, it is better to prompt the loan repayment as soon as possible to avoid the bad impact of debt in Islam. The faster you prompt the repayment for your loan and debt the faster you get paid off them all.

It means you have a great response to your loan and debt to settled your loan covenant on time. On the Quran surah, Al Isra verse 34 mentions about this.

وَلَا تَقْرَبُوْا مَالَ الْيَتِيْمِ اِلَّا بِالَّتِيْ هِيَ اَحْسَنُ حَتّٰى يَبْلُغَ اَشُدَّهٗۖ وَاَوْفُوْا بِالْعَهْدِۖ اِنَّ الْعَهْدَ كَانَ مَسْـُٔوْلًا – ٣٤

“And do not approach the property of an orphan, except in a better way (useful) until he is an adult, and fulfill a promise, because that promise must be held accountable.” (QS 17:34)

5. Islamic’s Ethic in Loan and Debt

There are some ethics to do the loan and debt in the Islamic way. Whether you take them from the bank company or just borrow from your family member, you should follow the rules. Everything you take from others should be paying it back in a good way based on Islamic law such as the law of borrowing money from the bank.

On the Quran surah, An Nisa verse 29 mentions about this.

يٰٓاَيُّهَا الَّذِيْنَ اٰمَنُوْا لَا تَأْكُلُوْٓا اَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ اِلَّآ اَنْ تَكُوْنَ تِجَارَةً عَنْ تَرَاضٍ مِّنْكُمْ ۗ وَلَا تَقْتُلُوْٓا اَنْفُسَكُمْ ۗ اِنَّ اللّٰهَ كَانَ بِكُمْ رَحِيْمًا – ٢٩

“O, believers! Do not eat your neighbor’s property with a false path (not true), except in trades that apply on the basis of mutual liking between you. And do not kill yourself. Truly, Allah is Most Merciful to you.” (QS 4:29)

So, there are five rules that you should know about loans and debt in Islam. Remember to think carefully before you decide to take one of them. May Allah give you His blessing.