Chapter on Loans

Shaykh al-Islām was asked:

A man lent another man one thousand dirhams, then demanded repayment. The borrower said, “I am insolvent. I will buy some goods from you at an increased price in return for your allowing me six months’ respite.” Is that permissible?

He replied:

It is established that the Prophet—may Allah bless him and grant him peace—said:

“A loan combined with a sale is not lawful.”

Thus, if he sells to him and lends him money, that is among the things Allah and His Messenger have forbidden. Both parties deserve discretionary punishment if the prohibition has reached them. The loaned money and the goods must be returned to their respective owners. If that is impossible, the lender is entitled only to the equivalent of the loan and the seller only to the fair market value of the goods. He is not entitled to anything beyond that. Allah knows best.