Debt and Ihsaan (Hadith No. 447)
In the mosque l asked Ibn Abi Hadrad to pay the debts which he owed me and our voices grew louder. Allah’s Apostle heard that while he was in his house. So he came to us raising the curtain of his room and said, “O Ka’b!” I replied, “Labaik, O Allah’s Apostle!” He said, “O Ka’b! Reduce your debt to one-half,” gesturing with his hand. I said, “O Allah’s Apostle! I have done so.” Then Allah’s Apostle said (to Ibn Abi Hadrad), “Get up and pay the debt to him.”
The way Prophet (SAW) dealt with this situation shows us how Ihsaan can be done in dealings involving debt and loan. The one paying the debt should do so within the prescribed time limit and the lender should go easy with him. If possible, reduce the amount. If not, be nice.