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Can a loan of gold be repaid with cash?

Question:

What do the scholars and experts of shari’ah say regarding a person who took a loan in the form of gold? If he chooses to return the loan as gold, then he would give the equivalent weight that he borrowed. However, if he was to repay the loan in cash, would this be based on the gold’s value the day it was given as a loan or the gold’s value on the day of repayment?

Answer:

All perfect praise is for Allah ﷻ, The Lord of the Worlds. I testify that there is none worthy of worship except Allah ﷻ, and that Prophet Muhammad ﷺ is His Messenger.

Yes, it is correct that when the gold is repaid it will be the same amount in weight. However, if the lender is happy with money instead then the amount of money will be the price at the day of repayment not when the gold was taken, because in principle it should be the gold that is being returned.

And Allah ﷻ knows best.

This fatwa is written by Dr. Hafiz Muhammad Munir Al-Azhari