Taking Out a Loan with the Intention of not Paying it Back

Taking out a loan when in need is, without doubt, permissible, for it is something that human beings at times may need to do. However, when taking out a loan, one must have a firm and resolute intention of paying it back, and it will be a grave sin to intend not to repay the loan. Grave warnings have been promised in the Qur’an and Sunna for the one who fails to repay a loan without a genuine and valid excuse.

Allah Most High says:

“O you who believe! Consume not your wealth among yourselves in vanities: But let there be amongst you traffic and trade by mutual good-will.” (Surah al-Nisa, V: 29-30)

And:

“Allah dose command you to render back your trusts to those to whom they are due…” (Surah al-Nisa, V: 58)

Sayyiduna Abu Hurayra (Allah be pleased with him) narrates that the Messenger of Allah (Allah bless him & give him peace) said: “Whosoever takes the wealth of people (as loan) with the intention of repaying it, Allah will repay it on his behalf. And whosoever takes it with the intention of not repaying it, Allah will destroy it.” (Sahih al-Bukhari, no: 2257)

Imam Hafidh Ibn Hajar al-Asqalani (Allah have mercy on him) states, whilst explaining this Hadith, in his colossal commentary of Sahih al-Bukhari that, the meaning of Allah destroying the wealth is that Allah will constrict one’s wealth or inflict upon one physical disabilities. It is also said that this is referring to the hereafter, in that Allah will punish one in the hereafter. (Fath al-Bari, 5/68/69)

Sayyiduna Abu Hurayra (Allah be pleased with him) narrates that the Messenger of Allah (Allah bless him & give him peace) said: “Procrastination (delay) in repaying debts by a wealthy person is oppression.” (Sahih al-Bukhari, no: 2270)

Sayyiduna Abd Allah ibn Amr ibn al-Ass (Allah be pleased with him) narrates that the Messenger of Allah (Allah bless him & give him peace) said: “Every sin of a martyr is forgiven except debt.” (Sahih Muslim, no: 1886)

Imam Nawawi (Allah have mercy on him) says that this Hadith shows the importance of fulfilling the rights of the servants of Allah (huquq al-Ibad), and that even virtuous acts such as Jihad and martyrdom can not expiate for the rights owed to other human beings.” (al-Minhaj Sharh Sahih Muslim, P: 1451)

There are many other Hadiths of the Messenger of Allah (Allah bless him & give him peace) expressing the importance of repaying debts, but the above-mentioned few narrations should suffice for those who reflect. Indeed, it is highly sinful to consume other people’s wealth unlawfully. If one takes out a loan, then one must try and repay it, even if the loan is taken from a non-Muslim or a bank. The one who does not repay the debt will be guilty of theft, oppression, consumption of the wealth of others unlawfully and many other sins. Allah Most High’s punishment is promised for such an individual both in this world and the hereafter. Excessive worship of Allah will be of no avail if one is negligent of the rights of fellow human beings.

Moreover, if one takes out a loan without the intention of repaying it, then one will be considered to have consumed unlawful (haram) wealth.

It is stated in al-Fatawa al-Hindiyya (a major Hanafi Fiqh reference work):

“There is no problem (la ba’s) in one taking out a loan if there is a genuine need, provided one has the intention of paying it back. However, if one takes out a loan without intending to repay it, then one will be consuming unlawful (haram) wealth.” (al-Fatawa al-Hindiyya, 5/366)

Thus, it will be unlawful to take out a loan from a bank with an intention of not paying it back. (If interest is involved in the agreement, then that is another sin). The person in question will also be guilty of the sin of lying if he gives the bank a false home address, so as to avoid being caught. The money taken would be considered unlawful (haram), as mentioned in the text of al-Fatawa al-Hindiyya.

Based on this, if this unlawful money was used to purchase an item or build a property, then the item or property would also be considered unlawful. However, if the person in question pays off the loan, it would be permitted to use the item or reside in the property, and it would no longer remain unlawful.

To conclude, taking out a loan and not repaying it is highly sinful. Those involved in such an activity should repent sincerely and ensure that the loan is paid back. Once the loan is paid back, anything purchased with the loan would be considered Halal, otherwise it will be akin to consuming unlawful wealth. May Allah save us all from being involved in such unlawful practices, Ameen.

And Allah knows best