Should I Include Loans When I Calculate My Zakat?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

I needed money, and one of my relatives helped me out. He is happy to get the money back (if I can ever repay), and he is happy if I don’t repay.

Is zakat calculated on this? It is a confusing matter as I’m not financially well off, and while I pray I can repay, it is possible I may never be able to. If Allah opens my income gates, I may be able to. No clue. It is a very very large amount.

Time passes. What to do about this?

Answer: Wa alaikum assalam wa rahmatullah,

If he loaned the amount of money to you, it would be considered a debt owed to him.

If he merely gifted the amount to you, or forgave the “loan,” then it would be owned by you fully. Consequently, you would add it to your other financial assets and pay zakat the next time your due date comes around.

If you did not own the zakatable minimum (nisab) before this gift, or you did not have a zakat due date, the date the money was received would be your new zakat due date, assuming you have no other debts and the like. Hence, you would owe zakat the following lunar year.

[Shurunbulali, Maraqi al-Falah, with Tahtawi’s Gloss (2.391)]

Please also see: Is Your Zakat Due? – A Reader and Resources on Giving Zakat and: Zakat: A Comprehensive SeekersHub Reader and: Zakat Calculator


[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

Day 19: Give A Good Loan – 30 Deeds 30 Days

Day 19: Give A Good Loan

Scholars say that giving a loan can have greater reward than charity, because it creates a good relationship where one person empowers another, and gives them a sense of responsibility and a preservation of dignity. There is a time for charity, and a time for lending.

This Ramadan, if you are able, try to empower someone by loaning money to someone who asks for it. It may be to start a business venture, go on a trip, or make a purchase they need. Do it with respect and kindness, and be hopeful for Allah’s reward.

Bring new life to this Ramadan by enrolling in a FREE On-Demand course.

Day 23 in a Nutshell – Why Loans Are Better Than Sadaqa, #YourRamadanHub Xtra

If you missed the livestream of the extraordinary short talks by Shaykh Faraz Rabbani, you can listen to them in full on the SeekersHub podcast on iTunes. Please subscribe for automatic updates. If you could take a moment to rate the podcast and leave a review, we’d really appreciate it!

In the meantime, we present you with #YourRamadanHub Xtra – the best of the day’s events in a nutshell, with Abdul-Rehman Malik and his guest, Umar Abdulmajeed.


Let’s #GiveLight to Millions More

We envision a world in which no one is cut off from the beauty, mercy and light of the Prophetic ﷺ example. A world where the dark ideology of a few is dwarfed by radiant example of the many who follow the way of the Prophet ﷺ. But we can’t do it alone. We need your support. This Ramadan, we need you to help us #GiveLight to millions more. Here’s how.

Debt: How It Destroys Lives, How You Can Fight It

RizqwiseThe good folks at Rizqwise have a very worthy multi-part series on debt that you should really listen to.
If you haven’t got the time, this concluding episode is not to be missed. Rizqwise speak to Rehan Huda, a prominent investment banker and leading authority in Islamic Finance, about some of the key lessons we can learn from the long history of debt.
Don’t forget to subscribe to their email newsletter to stay up to date.

Debt: The Full Rizqwise Series

  • How Debt Destroys Lives, Communities, and Civilizations
    Duration: 53:11
  • How to Stay Out of Debt (For Good)
    Duration: 33:58
  • Ask Risqwise: Is investing in the stock market risky?
    Duration: 27:51
  • How to Get Back on Track With Your Debt Elimination Plan
    Duration: 29:16
  • 5 Tips to Stay Motivated While Paying Off Debt
    Duration: 29:09
  • Ask Rizqwise: Should I pay off loans before investing?
    Duration: 18:45
  • Avalanche vs Snowball: Two Very Different Ways to Pay Off Debt
    Duration: 29:51
  • Ask Rizqwise: How do I go “all in” on debt?
    Duration: 26:14
  • How to Set Your Debt Free Date
    Duration: 27:31
  • The Critical First Step to Eliminating Debt Once and For All
    Duration: 20:18
  • Ask Rizqwise: Why Credit Cards Make You Spend More Money
    Duration: 20:58
  • The Great Debate: Active vs Passive Investing
    Duration: 29:21
  • Ask Rizqwise: Getting Married and Out of Debt
    Duration: 25:38


Resources for seekers:


Is an Indexed Loan Akin to Unlawful Usury?

Answered by Ustadh Tabraze Azam

Question: Assalamu alaykum wa rahmatullahi wa barakatuh

The other day I was reading about an interest-free loan I was considering on taking. However, they mentioned that the debt would be indexed each year to reflect changes in the Consumer Price Index so that the debt maintains its real value. Thus, no “real” interest would be charged.

Would I be falling into riba if I end up repaying more than what I initially borrowed?

Answer: Wa alaikum assalam wa rahmatullahi wa barakatuh,

I pray that you are in the best of health and faith, insha’Allah.

Yes, because paying a different amount to the one you borrowed would be considered akin to unlawful usury (riba).

The basis in loans is that you need to pay back the exact amount borrowed, regardless of its value on the day it is owed. The details of this discussion are explained by Mufti Taqi Usmani in his Buhuth fi Qadaya Fiqhiyya Mu`asira.

Please also see: Answers Related to Loans

And Allah alone gives success.


Tabraze Azam

Checked & Approved by Shaykh Faraz Rabbani

Can I Offer an Incentive When I’m Seeking a Loan?

Answered by Shaykh Faraz A. Khan

Question: What is a halal form of offering incentive to a loaner when requesting a loan. I am a small business owner seeking to purchase a building/shop and I am in need of start up money. Everyone is interested in investing in exchange for a continuous percentage of profit. I am more interested in one-time loans, but I do not know the best way to present it to them in a way they feel benefits them.


Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health and states.

In Islam, a loan is considered a type of charity, that is to say, no benefit can be attached to it. One simply lends a particular amount of money, and then takes back that same amount of money upon the due date.

There can be no worldly incentive associated with the contract; the only incentive that can be offered is otherworldly, i.e., reward in the next life. Many Companions are reported to have said, “Any loan that comes with a benefit is a form of usury.” [Bayhaqi, Sunan Saghir]

Having said that, the otherworldly incentive is huge. A person who seeks a loan is often in grief or difficulty, and our Beloved Messenger (peace and blessings be upon him) said, “Whoever relieves a believer from a worldly grief, Allah will relieve for him one of the griefs of the Day of Judgment. Whoever provides ease to a person in difficulty, Allah will provide him ease in this world and the next… Allah continues to aid the servant so long as the servant aids his brother.” [Muslim]

Please also see this related answer, specifically dealing with the reward of giving a loan:

Loans Entailing More Reward than Charity and the Validity of an Estate’s Executor Being a Beneficiary in the Will

Finally, one could consider using Islamic alternatives such as financing mechanisms predicated upon profit and loss sharing, such as joint partnership (sharika/musharaka) and silent partnership [of capital and labor] (mudaraba). For more detail, please see An Introduction to Islamic Finance by Mufti Taqi Usmani.

And Allah knows best.

Checked & Approved by Faraz Rabbani

Should I Give Out a Loan to a Close Relative if I’m Already in Debt?

Answered by Shaykh Faraz A. Khan

Question: We recently received a request from a close relative to lend him substantial loan which he promised to pay back in a few months. The problem is, we already have debt of over $10,000! I know this person’s need is genuine and I would feel guilty about refusing him a loan ….. But I need to know what the shariah/sunnah recommends about taking on additional debt on oneself when a close relative asks for a loan. Please advise. I want to do what will please Allah (SWT). The only reason I cannot imagine saying yes to giving this relative a loan is because I am heavily in debt myself and do not have any immediate means to pay off my own debt, let alone take another loan on somebody else’s behalf.

Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health and states.

Your Financial Priority

Your number one financial priority is to repay your debts: they take precedence even over zakat, hajj, and estate division. [Ala’uddin Abidin, Hadiyya Ala’iyya]

Giving out a loan, then, would be of lower priority according to the Sharia. Politely tell your relative that you are unable to lend out the money.

Your intention is very noble, and you will be rewarded for it inshaAllah. Our Beloved Messenger (peace and blessings be upon him) said, “Actions are only by intention, and every person will have only what he intends.” [Bukhari, Muslim]

Other Ways of Helping

Having said the above, your inability to lend out money does not mean you cannot help out in some other manner. Try to facilitate the matter for your relative, see if you can find others to lend money, and encourage your relative to be steadfast and patient during this time of need.

The Prophet (peace and blessings be upon him) said, “Allah aids and supports the servant so long as the servant aids and supports his brother.” [Muslim]

As well as, “Do not consider any good act as insignificant, even if only meeting your brother with a cheerful face.” [Muslim]

As well as, “Whoever points to the good has the reward of its doer.” [Muslim]

In Surat al-`Asr, Allah Most High states that the human being is in a state of loss, except for the righteous, whose last description in the surah is, “They enjoin others in patience.”

And Allah knows best.


Checked & Approved by Faraz Rabbani

Loans Entailing More Reward than Charity and the Validity of an Estate’s Executor Being a Beneficiary in the Will

Answered by Shaykh Faraz A. Khan

Question: I have questions about 2 statements made by an imam, which I suspect to be incorrect.

First, he said there is an authentic hadith wherein the prophet said that to give a loan is 17 times more rewardable than to give charity of the same amount.

Secondly, on the matter of inheritance, he said it is acceptable for the property to be divided up by one of the beneficiaries. i.e., the executor of the will can be someone who stands to receive goods from the deceased. I feel this is unethical because it leaves the tempting opportunity to interpret the will favorably to oneself. I feel the correct way is for the executor to be a state-appointed official with no personal interest.

Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health and states.

(1) There is a hadith that states, “On the night I was taken in journey [to Jerusalem], I saw inscribed on the door of Paradise, ‘Charity is multiplied ten-fold, while giving a loan eighteen-fold.’ I said, ‘O Jibril, how come a loan is more meritorious than charity?’ He replied, ‘Because the beggar asks [for charity] despite having wealth, while the one seeking a loan does not do so unless out of real need.'” [Ibn Maja; Bayhaqi, Shu`ab al-Iman; Tabarani, Mu`jam Awsat]

However, the chain of transmission (isnad) of this hadith is weak, due to a weak narrator (although Ibn Hibban and others considered that narrator reliable). [Haythami, Majma` al-Zawa’id]

With respect to its meaning, the hadith itself gives the basis of a loan being better than charity, namely, that one seeking a loan is in real need. However, many scholars deemed charity as better since nothing is given back to the donor. There is also a hadith that supports this opinion, namely, “If one loans two dirhams, it is akin to donating sadaqa of one dirham.” [Ibn Hibban]

Imam Munawi reconciles these different hadiths by saying, “In reality, it depends on the individuals, their circumstances and the times.” That is, every situation is unique, so the merit of each case would have to be examined individually: sometimes charity is better, other times giving out a loan is more meritorious. [Fayd al-Qadir]

(2) The executor of a will may be one of its beneficiaries. There is nothing wrong with that according to Sharia. Usually, the entire family is involved in the process, so it is not that easy to favor oneself in the process of estate division. One could actually make the opposite argument — that appointing a family member as executor is probably more likely to lead to fair division as compared to appointing someone outside the family.

In any case, what the jurists mention is that the executor should be upright, trustworthy, and able to carry out the will. [Haskafi, Durr al-Mukhtar; Zada, Majma` al-Anhur; Maydani, Lubab]

Lastly, in the United States (in some states at least), it is not uncommon for a good portion of the estate to be used up in exorbitant fees and the like when estate division is left to attorneys, even if state-appointed. So it is important for one to specify the executor in one’s will.

And Allah knows best.