In the name of Allaah, the Most Merciful, the Bestower of Mercy.
Many people choose the blessed month of Ramadhan to donate their Zakaah. Ramadhan is a month of charity and good deeds, thus people coincide their Zakaah with this blessed month.
In donating Zakaah, there is confusion with the issue of loans. Does a person have to donate Zakaah on a loan? If so, who pays the Zakaah?
There are two types of people with regards to a loan.
1. Debtor: A person who has received the loan and owes the money to the person who lent it to him.
Zakaah Ruling: As long as he has the money in his possession, and has surpassed the Nisaab  on his savings for a whole year then he must pay the Zakaah at 2.5%.
2. Creditor: A person who has given the loan and is owed money by the person who borrowed it off him.
There are two possible scenarios:
a. The debtor is able to pay back the loan easily but chooses to pay installments or delays out of choice.
Zakaah Ruling: The creditor must pay Zakaah on it. He adds the loan to the amount of savings he has; if the amount is above the Nisaab then he must pay Zakaah at 2.5%. He must pay Zakaah for each year that has passed in this same situation.
b. The debtor finds it difficult to pay back the loan or refuses to do so, and therefore it is not expected that the loan will be paid back soon.
Zakaah Ruling: The creditor not need to pay any Zakaah, because it is as if the money is not his – until a time comes when he can easily attain his money. After he has got his money back, he then waits for a whole year to pass on the Nisaab and then gives the Zakaah at 2.5%.
Allaah knows best.
Written by the one in need of Allaah,
Abul Abbaas Naveed Ayaaz
17th Ramadhan 1436h
4th July, 2015
 The minimum amount in savings for Zakaah to be an obligation. It is the equivalent of 85g of gold or 695g of silver.
 Shaykh Ibn Baaz was asked: Is Zakaah given on loans?
Response: There is further detail with regards to loans. If the loan is with a person who cannot pay it back, or refuses to fulfil the right then there is no Zakaah until he posses his money and a whole year passes.
If the loan is with a person who is able to pay back the loan if requested, then he must pay Zakaah. It is like a trust you have placed with Zayd or Amr. Zakaah is given if a year has passed (i.e. a year has passed with him having the Nisaab).
As for the person who finds it difficult to repay the loan, it is as if you have given the wealth away. And there is a danger that it may or may not be recovered. Similar to this is the person who simply refuses to repay the money, he comes under the same ruling. We ask Allaah for pardon.