Interest is completely prohibited in the Quraan Majeed and Hadith Shareef.
Involvement in interest is such a severe crime that Allah تبارك و تعالى has declared war upon those who consume interest. Interest is so greatly detested that Rasulullah صلى الله عليه و سلّم has invoked the curse of Allah تبارك و تعالى upon the one who takes interest, the one who gives interest and even the scribes and witnesses of the interest transaction. The severity of interest can be gauged by the fact that Rasulullah صلى الله عليه و سلّم has declared it to be worse than fornicating thirty six times.
These warnings should be sufficient to impress upon us that interest is no light matter. It is among the worst crimes and the most reprehensible of sins.
When a believer understands and appreciates the severity of interest, then he will not only abstain from interest, but even from those things in which there is a doubt of interest. The statement of Hadhrat Umar رضي الله عنه is explicit in this regard:
دعوا الربا و الربية
“Refrain from interest as well as that which has the trace of interest in it.”
In one hadith, Rasulullah صلى الله عليه و سلّم has forbade the creditor from taking any gift or benefit from his debtor as this also constitutes interest.
Hadhrat Anas رضي الله عنه reports that Rasulullah صلى الله عليه و سلّم said:
عن أنس رضي الله عنه عن النبي صلى الله عليه و سلّم قال إذا أقرض الرجل الرجل فلا يأخذ هدية
“If any person has given someone a loan, he should not accept any gift from the debtor”
The same prohibition of taking benefit from the debtor is mentioned in another Hadith in more detail. Rasululullah صلى الله عليه و سلّم is reported to have said:
إذا أقرض احدكم قرضا فأهدي له أو حمله على الدابة فلا يركبه و لا يقبلها إلا ان يكون جرى بينه و بينه قبل ذلك
“If you have given a loan to some person and he (the debtor) wishes to give you a gift or wishes to offer you a lift on his conveyance (due to being indebted to you), then do not accept his gift or his lift, except if the exchanging of gifts and giving lifts was a common practice between them prior to giving him the loan.”
Due to the emphasis on not accepting any benefit from the debtor, the Sahaabah رضي الله عنهم also exercised extreme caution in dealing with their debtors. Hadhrat Abu Burdah رضي الله عنه relates: “When I came to Madina Munawwarah, I met Hadhrat Abdullah bin Salaam رضي الله عنه. He said to me, “You are living in a country (Syria) where dealing in interest is common. Therefore, if anyone who owes you money gives you a load of straw, wheat or grain as a gift (due to being indebted to you) then do not accept his gift, for certainly it is interest.”
The crux of the above discussion is that every form of interest is extremely abhorrent and detestable in the sight of Shari’ah and hence has to be totally shunned.
(Business and Commerce in the Light of Islam pg. 512-514)