What is the ruling on lending iron damaged by rust on condition that it be returned new and free of rust?

Naming this transaction a loan (إعارة) is incorrect; rather, it is a debt (قرض), because a loan (إعارة) applies to something whose essence remains after use. This debt (قرض) is permissible as long as the borrowed iron is precisely described. It is permissible for the borrower to return something better than what was borrowed without that being stipulated; otherwise, it would be usury (riba). However, if he returns something better without stipulation, then he is a doer of good, voluntarily giving.