A relative has loaned you some money that you need to pay back in a year time. The due time arrives and you are not able to pay it back. Two years pass and he tells you that because of you not paying back on time, he lost some money in a business. Is it allowed for the borrower to pay the losses if they both agree? Or is this considered Riba?
Answer:
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.
If the debtor pays an extra amount over the original loan when repaying the debt as a an act of kindness and benevolence towards the lender. If this increment is not a condition in the contract which he is obligated to fulfill, then there is no harm and it is a praised act of kindness.
Abu Hurayrah, may Allaah be pleased with him, narrated that a man came to the Prophet, sallallaahu ‘alayhi wa sallam, demanding (repayment of) his debts (a camel). The Messenger of Allah, sallallaahu ‘alayhi wa sallam, said (to the Companions)”Give him a camel of the same age as that of his.” The people said, “O Messenger of Allah! There is only a camel that is older than his.” He said, “Give (it to) him, for the best amongst you is he who pays the rights of others handsomely.” [Al-Bukhaari and Muslim]
This is unlike an increase which is set as a condition and which the borrower is obliged to pay; this type is not permissible for it is Riba.
Ibn Al-Munthir said: “The scholars agreed in consensus that if the lender stipulates (a condition) on the borrower to pay an increase or give a gift over the loan, and the lender takes it, then this is Riba.”
Allah knows best.