Question: Many people loan one another money without [contractually] writing anything; thereafter, problems occur between them along with the loss of one’s right – the extent of which only Allaah truly knows. So what is your advice [to the people]?
Response: Allaah Jalla wa ‘Alaa says:
[…and] He then says:
As for [a contract of] buying and selling that which is in front of them, and there being no delay [in payment nor receipt of the goods or services, then Allaah ‘Azza wa Jall said]:
As for [a transaction] where there is a delay [in receiving the goods or services], then it is imperative that [the contract] is put in writing, so as not to forget, or the one who has [received] a loan does not deny he has [received] it. If there is a contract, then you will not have such a denial, [because] having [a contract] protects your right; and if you do not write [anything down], then you are careless and negligent.