Is Borrowing Money from Friends Halal? (Islamic Ethics Guide)

In the modern world, financial needs often outpace immediate savings. While banks offer commercial loans with interest, many Muslims turn to their social circle. Borrowing from a friend or family member is not just a financial transaction; it is a sacred trust (Amanah) that carries significant ethical and legal weight in the Islamic tradition.

Scholarly consensus overview

Why this is a major topic

Personal loans are often the root cause of broken relationships (Qat' al-Rahm). Because the lender is a friend, there is often a lack of formality—no written contract, no clear deadline, and no witnesses. When things go wrong, it doesn't just result in financial loss; it results in the loss of a brotherhood or sisterhood.

• Prophetic Warning: The Prophet (peace be upon him) frequently sought refuge from debt, noting that "when a person is in debt, he speaks and lies, and makes a promise and breaks it." (Bukhari).
• Legal Status: Borrowing is permissible (Halal) when there is a genuine need, but should be entered with extreme caution regarding the intention to repay.

What is Qard al-Hasan?

The term Qard al-Hasan literally means a "Good Loan" or a "Beautiful Loan." It refers to a loan given purely for the sake of helping another person, without任何 expectation of profit or interest.

In Islamic finance, the primary rule is: "Every loan that draws a benefit is Riba." This means if your friend lends you £1,000, they can legally only ask for exactly £1,000 back. They cannot ask for a fee, a gift, or even a favor in return that wouldn't have been given otherwise.

The Mandate of Writing Contracts

The longest verse in the Quran (2:282) is entirely dedicated to the ethics of debt. It provides a blueprint for how a loan between two people should be handled:

1. Write it down: "O you who have believed, when you contract a debt for a specified term, write it down."
2. Involve a Scribe: Ideally, a third party should write it to ensure neutrality.
3. Calling Witnesses: "And bring to witness two witnesses from among your men."
4. Small or Large: The verse explicitly says "And do not be weary to write it, whether it is small or large, for its [specified] term."

Many disputes in the UK occur precisely because these steps are ignored in the name of "truing" a friend. Scholarly discussion emphasizes that formality is not a lack of trust; it is a way to preserve the relationship.

Ethics of the Borrower

The borrower carries the heaviest spiritual burden. If a person takes a loan with the intention not to repay it, they are seen as having committed a form of theft.

• The Intent: "Whoever takes people's wealth intending to repay it, Allah will repay it on his behalf; and whoever takes it intending to destroy it, Allah will destroy him." (Bukhari).
• The Promptness: Delaying repayment when you have the means is classified as Zulm (Injustice/Oppression).

The Virtue of the Lender

While the borrower is under pressure, the lender is promised immense reward. Giving a loan is considered superior to giving Sadaqah (charity) in some contexts because the person asking for a loan is usually in genuine need and has the dignity to want to repay it.

Leniency: The Quran encourages lenders to be lenient: "And if the debtor is in difficulty, then let there be postponement until [a time of] ease." (2:280). Furthermore, wiping the debt entirely if the person truly cannot pay is seen as the highest form of virtue.

Borrowing in the UK context

In the UK, informal loans between friends are not usually subject to FCA regulation, but they are legally binding contracts.

• Small Claims Court: If a loan is documented, it can be enforced in a UK small claims court. However, many Muslims avoid this to prevent further social damage.
• Alternative Finance: If a friend is in debt to a commercial bank, lending them money to pay off an interest-bearing loan is seen as a noble act of Takaful (mutual support).

Reducing Social Harm

Before entering into a loan agreement, consider the social landscape. Is this a person who values the relationship more than the money? Are you both prepared for the awkwardness that may arise if the deadline is missed?

Summary

• Permissibility: Borrowing from friends is fully permissible and often encouraged as an alternative to interest-based banking.
• Mandatory Procedures: Writing a contract (even via WhatsApp) and having witnesses is highly recommended to prevent disputes.
• Repayment: The borrower must prioritize debt repayment over all other optional spending.
• Ethics: The transaction should be treated with the gravity of a sacred trust (Amanah).