Generally speaking, a loan refers to giving money, property or goods to another party in exchange for repayment in the future of the loan amount besides the interest or other monetary charges. In simpler words, it means lending money on interest.
Lending money with interest has been condemned by Islam, Christianity, Judaism as well as Buddhism. However, attempts to justify interest on loans were made in the works that promoted capitalism. For example, in his book, Wealth of Nations, the Scottish economist, Adam Smith has tried to justify interest in economic terms. According to him the interest is the compensation which is paid by the borrower to the lender for the profit earned by him with the borrowed amount. He means to say that the lender also has a share in the profit which the borrower earns, so charging interest in justified. However, he has missed out an important point in his statement. Realistically speaking a borrower may or may not earn profit. Even in case he faces a loss he is expected to pay interest to the lender, which is unkind.
Gradually, the practice of giving loans on interest became rampant, along with all its flaws and inequitable element.
The frequent suicides by Indian farmers who are unable to pay back loans due to high rates of interest is a glaring example of the atrociousness of this entire concept from the moral and humanitarian point of view. The prevalent way of lending money is strictly against the tenets of Islam because Islam propagates brotherhood and charity as opposed to taking interest from someone who is needy.