Q: Is a bank loan or an interest-bearing loan riba?

The thing being handed over is money. What gets repaid? Exactly what was borrowed — nothing added Halal · A loan · Qur’an 2:279. Money is repaid like for like. Lending as a favour and getting back the same amount is permitted, whether between two people or with an institution. The lender makes no profit on the money itself. This is qard hasan, a benevolent loan. The lender may not require any increase or benefit in return for lending, whether written in the contract or simply expected. In the Maliki and Hanbali schools a lender should not accept gifts from the borrower before repayment unless such gifts were usual between them before the loan. Hanafis allow gifts that were neither agreed nor expected. More than was borrowed — interest, or a fee for taking time to repay Haram · Riba · Qur’an 2:275. Money lent for more money is riba in its clearest form. The extra is charged purely for time, not for any real asset or shared risk. It makes no difference whether the lender is a friend, a payday lender or a bank, or whether the rate is 5% or 50%. Any increase on a money loan is riba. Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.

Question 1

Is a bank loan or an interest-bearing loan riba?

Accepted Answer

The thing being handed over is money. What gets repaid?

Exactly what was borrowed — nothing added
Halal · A loan · Qur’an 2:279. Money is repaid like for like. Lending as a favour and getting back the same amount is permitted, whether between two people or with an institution. The lender makes no profit on the money itself. This is qard hasan, a benevolent loan. The lender may not require any increase or benefit in return for lending, whether written in the contract or simply expected. In the Maliki and Hanbali schools a lender should not accept gifts from the borrower before repayment unless such gifts were usual between them before the loan. Hanafis allow gifts that were neither agreed nor expected.

More than was borrowed — interest, or a fee for taking time to repay
Haram · Riba · Qur’an 2:275. Money lent for more money is riba in its clearest form. The extra is charged purely for time, not for any real asset or shared risk. It makes no difference whether the lender is a friend, a payday lender or a bank, or whether the rate is 5% or 50%. Any increase on a money loan is riba. Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.

Question 2

My brother lends me money and I repay him double next week. Is that halal?

Accepted Answer

No. Repaying more than you borrowed because it was agreed or expected is riba, even between brothers, and even if you offered it. Repay exactly what you borrowed. If you later want to thank him with a gift that was never agreed or expected, that is allowed (see the thank-you gift question).

Question 3

Is a small interest rate, like 2%, still riba?

Accepted Answer

Yes. The prohibition is on any increase on a money loan, not on a high rate. Two per cent and fifty per cent are the same in kind.

Question 4

Is an interest-free loan from a friend or family halal?

Accepted Answer

Yes. Lending and getting back the same amount is qard hasan, a benevolent loan, and it is rewarded. The lender may not require any increase or benefit in return, whether written down or simply understood.

Question 5

Can I ask for my money back early or set a repayment date?

Accepted Answer

You may agree a date as a kindness. In the Hanafi school a loan’s term does not bind the lender, who may ask for the money back at any time; the Maliki school holds the lender to the agreed date.

Question 6

Is a 0% loan from a shop or a bank halal?

Accepted Answer

A loan repaid with nothing added is halal. Check that nothing is added by another name: a late fee that grows the debt, a compulsory insurance or a “processing” charge tied to the amount or the time would make it riba.

Question 7

Is a student loan with interest riba?

Accepted Answer

Yes, if interest is added. A student loan is a money loan, and any increase on a money loan is riba, whether the lender is a bank or a government scheme. A student loan repaid with exactly the amount borrowed is halal. For loans adjusted to inflation, see the inflation question.

Question 8

Is interest allowed with a bank in a non-Muslim country?

Accepted Answer

This guidance treats it as riba, wherever you live. Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.

Question 9

Can I take an interest loan if I have no other choice?

Accepted Answer

Interest stays forbidden, and lending on interest is never allowed. Hanafi texts lift the sin from a borrower only in real necessity: a genuine threat to life or to bare subsistence, after every other way, such as selling assets or an interest-free loan, has failed, and only for the amount needed. Buying a home or a car, or growing a business, does not qualify by itself. Whether your situation is a necessity is for a scholar to judge with you personally.

Question 10

Can I be a guarantor, co-signer or witness for an interest loan?

Accepted Answer

No. The Prophet cursed the one who consumes riba, the one who pays it, the one who writes it down and its two witnesses, and said they are all alike (Sahih Muslim 1598). A guarantor helps the loan happen, and a co-signer is a borrower. If you already signed, repent, ask to be released, and urge the borrower to clear the loan.

Question 11

Is a committee (a rotating savings circle) halal?

Accepted Answer

Yes, when everyone pays in the same amount, each receives the same total in turn, everyone stays to the end, and no turn is auctioned or discounted. It is then a chain of interest-free loans. A committee where members bid for an early turn by accepting less is riba.

Question 12

Is a business or government-backed loan with interest halal?

Accepted Answer

No. Interest on a business, start-up or state-backed loan is riba, whoever lends or guarantees it and whatever the rate. A state loan repaid with nothing added, apart from a fee within real cost, is halal. Where the state pays the interest for you, views differ, so ask a scholar about the scheme.