Dr. Monzer Kahf, a prominent Muslim economist and counsellor, answers: In Shari’ah, there is a difference between interest and good manners at the time of repayment of a loan. The Prophet (peace and blessings be upon him) praises “Husn al-Qada’a” i.e. bounteous repayment of debt. For instance, while settling a debt he owed Jabir ibn `Abdullah, the Prophet (peace and blessings be upon him) instructed Bilal to pay the amount of debt and “give him more.” This is certainly permissible and rewarded.
As for interest, it must be inserted, as a condition, in the contract or applied as a result of customary practices “al `Urf.” However, if one volunteers an extra at the time of repayment, it is halal (lawful) insha’Allah.