Question:
25 years ago, when I went abroad for my studies, I took a loan from a bank in another country. I went to study in another country and took a loan from a bank there. Since I was a student, they gave me the loan. It seems that they give education loans even to foreigners if they are studying there. With that money, I returned to my country. Until now, I have not been able to repay the loan. I took the loan knowing that interest is haram and thinking I would not repay it. Now, feeling guilty; even I wanted to go back after all these years to repay, they may file criminal charge against me. Therefore, instead of repaying the bank, can I give that money as charity for good purposes or to poor families?
Answer:
When he took the loan, he knew that interest is haram, and he also knew that he would not repay it. After two years, the bank probably marked the account as a bad debt and closed it. If they wait two years and there is no repayment, they classify it as a bad account and close it. Now he understands that even though interest is forbidden, he must repay what he agreed to repay. Earlier his understanding of religion was different. Now he realizes that even though interest is haram, since he agreed to the loan, he must repay both the principal and the agreed interest and fulfil the agreement.
But if he goes now to repay it, they may create legal problems. They may ask where he was all these years, file cases, arrest him, and cause serious trouble. Even though he goes with a good intention to repay, they may treat him like a criminal and imprison him. Because of this fear, he is hesitant. So, he asks: instead of repaying the bank, can I give that money as charity for good purposes or to poor families?
He wants to repay the bank and even has the money. But if he goes, they may treat him legally as an offender, not as someone who repented. They may arrest him, file charges, blacklist him, seize his passport, restrict his travel, and cause many hardships. So, he asks whether he can give the money as charity instead.
There are two points here. First, if you owe money to someone, you cannot give it to someone else. If you owe me money, can you give it as charity to someone else instead of giving it to me? No. The money must be given to the person you owe. You cannot give someone else money that belongs to another person. Since the bank is the rightful owner of that money, you must repay the bank. Giving it to someone else does not settle the debt.
Second, suppose you borrowed from someone but cannot find them. You searched for years but cannot locate them, and you do not know their family or address. In such a situation, you still owe them. On the Day of Judgment, they will claim their right.
If you sincerely intended to repay but could not, then you should do charity from your own money, seeking Allahﷻ’s forgiveness. Pray to Allahﷻ and say that you intended to repay but could not and ask Allahﷻ to compensate the lender from your good deeds.
On the Day of Judgment, if the lender claims his right, Allahﷻ may take from your good deeds and give it to him. If you have accumulated extra good deeds through charity and worship, those extra deeds will be given, and your essential deeds will remain.
So, you must understand that giving charity now does not settle the debt in worldly terms. The accounting will happen in the Hereafter. To protect yourself, increase your good deeds, charity, and acts of worship so that compensation can come from those extra deeds.
Even if the lender was a non-Muslim, justice will still be given. Allahﷻ will transfer your good deeds to him if necessary. So, you should increase your good deeds to avoid loss.