Is it Permissible to Subtract Personal Loans from Zakat?

Yes, it is permissible to subtract personal loans from Zakat if the borrower is unable to repay due to financial hardship.

The following are the two views on the deduction of loans from Zakat:

1. View Supporting Loan Deduction from Zakat:

• Circumstance of Financial Hardship: Some scholars permit deducting a personal loan from Zakat if the borrower is unable to repay due to financial difficulties. Likewise, a debt payable within 12 months can also be deducted from Zakat.
• Transparency with Borrower: If the lender decides to subtract the loan from their Zakat, they should inform the borrower to ensure transparency and comfort.
• Respect for Borrower’s Wishes: If the borrower does not accept the deduction, the lender should not insist, on respecting their decision.
• Spirit of Shariah: This view emphasizes the higher purposes of Shariah, focusing on reducing financial burdens for those in need, which aligns with the objectives of Zakat.
• Prophetic Traditions: Some scholars support this view based on precedents found in the Prophetic traditions, which advocate for helping those in genuine hardship.

2. View Opposing Loan Deduction from Zakat:

• Loans for Merchandise: Scholars like Abu Hanifah, Ahmad, and the official stance of the Shafi school argue that loans taken for purchasing merchandise should not be deducted from Zakat.
• Avoiding Potential Abuse: Allowing such deductions could create an incentive for merchants to sell goods with the expectation of writing off the loans as Zakat. This may dilute the sincerity of the charitable act.
• Integrity of Zakat: These scholars stress the importance of ensuring that Zakat serves its true purpose — helping the deserving, without turning it into a tool for personal gain.

Thus, while opinions differ, the action of deducting a loan from Zakat should prioritize the true spirit of Shariah and be done with sincerity and transparency.

And Allah knows best!

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Other Zakat Questions You May Have

• Which Loans Can Be Subtracted From Zakat Assets?
• Is It Permissible to Deduct a Bank Loan from Zakat?
• Is It Allowed to Deduct Future Expenses & Bills from Zakat?
• Are Debts Due in Three Years Eligible for Zakat Deduction?
• Can Zakat Be Calculated Using the Solar Year Calendar?
• Is a Student Loan Deductible from Zakat Payments?