Forms of Forbidden Lending

Question: I needed a sum of money to complete the construction of my house in one of the cities of the Kingdom. I went to a man and asked him to lend me whatever amount of money he could. He said: "I want to give you a car—as if I had sold you a car." So he gave me 12,000 riyals, but registered it in his records as 21,000 riyals.
Since I did not see the car and I do not know its color, he simply registered it on paper and said: "You will pay back 1,000 riyals every month." Since I was in dire need of money at the time, I agreed to this arrangement. I have now paid only 8,500 riyals, and 12,500 riyals remain. Am I obligated to pay the amount exceeding the principal? Please inform me. May Allah reward you with good.

Answer: If the facts are as the questioner described, this transaction is invalid. It contains both usury of excess in a like-for-like exchange and usury of deferment. The one who gave you the money is entitled only to the principal—which is 12,000 riyals only—because, as you stated, he did not give you a car nor sell it to you. Rather, he gave you money for money, which is a clear evil and explicit usury. Both of you must repent to Allah for this and not return to anything like it. We ask Allah to accept your repentance.