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I am trying to find the answer for the below two scenarios.

Let's assume someone has given a loan of $10000 for a period of 2 months.

Scenario 1: The lender and borrower decide that for every extra month, the borrower will pay a fine of $100. Is this fine counted as usury even if both parties had agreed in advance?

Scenario 2: The lender and borrower had decided the original term to be 2 months. Due to unforseen circumstances, the borrower was unable to return the money in time. Since the lender trusted the borrower, he gave him extra time without any fine.

Later when the situation improved, the borrower not only was able to return the money but also wanted to give the lender a bonus as a mark of gratitude. Is this gift counted as usury?

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  • Did you take time to search it on the internet? Did you search "riba in Islam", I'm able to find some good in depth studies on this topic when I searched for "riba in islam pdf".
    – servant-of-Wiser
    Commented Jan 29, 2019 at 5:15

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The first scenario is the textbook definition of usury or interest. all or most instances of usury are agreed in advance, but agreement in advance does not make it lawful.

The second scenario would not constitute usury because the borrower gave the extra amount out of his own free will without any condition or request from the lender. And there would have been no consequence for them not paying that extra amount. Basically, it would just be a gift.

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    From Anas ibn Malik : The Prophet, , said: "When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers a ride on an animal, he should not ride, unless the two of them have been previously accustomed to exchanging such favours mutually." (Sunan al-Bayhaqi, Kitab al-Buyu', Bab kulli qardin jarra manfa'atan fa huwa riban) (source), this would be an extension to your answer to the second scenario.
    – servant-of-Wiser
    Commented Jan 29, 2019 at 5:28
  • @servant-of-Wiser . JazakaAllah. To explain the hadith for everyone, the Prophet (SAW) is fearing that the borrower might be pressured (rather than out of free will) to treat the creditor better than he would have otherwise, hence it might count as Riba.
    – The Z
    Commented Jan 29, 2019 at 5:42

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