◈ If the Debtor Pays Off the Loan Before Its Due Time, Is It Permissible to Reduce the Amount Owed? ◈
This issue is referred to by scholars as “Ḍaʿ wa Taʿajjal” (Give a Reduction and Settle Early).
In the modern banking system, a similar concept exists under the name of “negative interest”, where a discount is applied to the principal amount when it is paid before the due date. However, the classical issue mentioned here differs from that practice.
It is popularly known as:
“جلدی ادا کریں اور خفیف کروا لیں“
(Settle early and receive a discount).
❖ Scholarly Opinion:
There is a difference of opinion among scholars regarding its permissibility.
However, the stronger and correct view is that it is permissible.
✔ This is one of the narrations from Imām Aḥmad,
✔ Adopted by Imām Ibn Taymiyyah and Ḥāfiẓ Ibn al-Qayyim,
✔ And attributed to ʿAbdullāh ibn ʿAbbās (رضي الله عنهما).
❖ Reasoning and Justification by Ibn al-Qayyim (رحمه الله):
He explains:
This transaction is the opposite of interest (ribā). In interest, an addition is made to one of the two compensations in return for extra time. But in this case, a portion of the compensation is forgiven in return for waiving the remaining time period. Both parties benefit from it. Hence, this transaction does not constitute ribā — neither in its essence, nor linguistically, nor by custom.
He further elaborates:
Ribā means “increase”, which is absent in this transaction. Those who prohibit it do so by analogy to interest, but the clear difference between the two is evident:
① In ribā: “Either pay up or increase the amount.”
② In this case: “If you pay me early, I will waive a portion of the amount.”
There is no clear prohibition, no consensus, and no valid analogy that forbids such a transaction.
📚 Al-Lajnah al-Dāʾimah: Fatwā No. 17441
