Prohibition of a loan conditioned on an increase

Question:
He says: Honorable Shaykh, may Allah grant you success. A person lent me a sum of money for a specified period, and he stipulated that if I do not repay it within the agreed time, he will increase the amount by two percent. Is this transaction valid?

Answer:
This is the riba (usury or interest) of the pre-Islamic age of ignorance. This is the riba of the pre-Islamic age of ignorance: either you pay, or you accept. Either you pay now, or we will increase the debt and compound it against you. This is explicit riba of the pre-Islamic age of ignorance. Therefore, a loan or a debt is not to be increased. A debt is not increased by delay, whether it is a loan or not. It is not increased by delay except at the time of the contract. At the time of the contract, he says, "I will sell it to you for one hundred if you pay now, or one hundred and fifty if you pay later." Here, you choose whichever you want, and there is no objection to contracting for one of them. But if he increases it because the repayment was delayed, that is the riba of the pre-Islamic age of ignorance. Yes.