No, Muslims are generally forbidden from paying or receiving interest (riba) on loans, as it's considered exploitative and unjust under Islamic law (Sharia). Instead of traditional interest-based loans, Islamic finance offers alternatives like partnerships, leasing, or profit-sharing that align with faith, such as Islamic banks buying assets and reselling them at a markup or sharing profits/risks with customers.
A set of Islamic principles—based on the goal of providing economic justice for all—prohibits Muslims from paying or receiving interest during financial transactions. Some Jewish and Christian groups face a similar prohibition.
In Islamic finance, riba refers to interest charged on loans or deposits. Religious practice forbids riba, even at low interest rates, as both illegal and unethical or usurious. Islamic banking has provided several workarounds to accommodate financial transactions without charging explicit interest.
Islamic mortgages are mortgages that are compliant with Sharia law. Also known as 'halal mortgages', they differ from traditional home loans in that you don't pay interest as this is forbidden under Sharia law. Making money from money goes against Islamic finance beliefs.
Is Paying Interest Haram? Paying interest, otherwise referred to as Riba, is a major sin in Islam. Whether it's paying or charging interest, this is against Islamic law, in which Muslims are forbidden from lending or receiving money with the prospect of gaining something.
An interest-free alternative to traditional loans
Our Halal Loans adhere to the principles of Sharia Law. Instead of interest, borrowers pay an origination fee set based on the amount borrowed. The fee is subtracted from the amount of the loan.
Islam forbids both receiving and paying interest (riba). Many of us can end up accumulating interest through our bank accounts even if we don't want it, so what should we do with it? Since it is not permissible to use riba for one's own benefit, we should donate it to charity.
O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write [it] between you in justice. Let no scribe refuse to write as God (God is translated as Allah in Arabic.) Allāh has taught him.
Some people feel unable to use existing student loans due to their faith. This is most common among some Muslims because their religion prohibits engagement with interest, which is applied to all student loans. We support the goals of every person who meets the requirements and wants to go to university.
Islam allows only one kind of loan and that is qard-el-hassan (literally good loan) whereby the lender does not charge any interest or additional amount over the money lent.
Since it is not permissible to utilise interest for one's own benefit one should donate it to charity. Although there may be no religious reward for doing so, it disposes of the haram funds in a shariah-compliant way.
Qard al-hasan. Also known as al-qard al-hasan, qardh hasan qard hasan, or qard. An Islamic finance term, qard al-hasan refers to an interest free loan.
If you qualify for a lower interest rate, can handle the payments and won't fall back into bad spending habits, it might be a smart move. However, if the loan doesn't save you money or you're at risk of racking up new debt, it could do more harm than good.
Are mortgages Haram? Under Islamic law, yes traditional mortgages are seen as Haram. This is because they charge interest, which is making money from money, a practice forbidden in Sharia law. 'Islamic mortgages' despite the name, are actually home purchase plans, so provide a halal mortgage option.
The 7 major sins in Islam, often called the "seven great destructive sins," are derived from a Hadith and include: associating partners with Allah (Shirk), practicing magic, unjustly killing a soul, consuming usury (riba), eating an orphan's wealth, fleeing from battle, and slandering chaste, believing women. Avoiding these sins requires sincere repentance and turning to Allah.
In the Koran, receiving or paying interest is considered a sin because it promotes inequality. Interest is said to increase the gap between the rich and poor and anyone who receives it is expected to donate the money to a charitable cause.
This is because interest is strictly forbidden in Islam, as Muslims believe that it promotes unfairness in financial transactions, which leads to social inequality and injustice.
When it comes to the question of whether Muslims pay interest on mortgages, the answer is a clear no. The concept of Riba (interest) is not permitted in Islam, so conventional loans aren't an option. Instead, we offer a completely different way to buy a home that's built on partnership, not debt.
It is widely recognized that student loans often involve interest, and as outlined in the Quran, interest (riba) is considered a major sin in the religion of Islam.
Major sins: Al-Kaba'ir
"Whoever takes the wealth of people with the intention of destroying it, Allah will destroy him" (Sahih Bukhari, Hadith 2387). However, if a debtor is genuinely unable to repay, creditors are encouraged to grant more time or forgive the debt, as highlighted in Surah Baqarah Verse 280.
Quran verse 93:4, from Surah Ad-Duha, states, "And the next life is certainly far better for you than this one," a message of hope and divine reassurance that the Hereafter holds greater reward and peace than worldly life, encouraging patience and trust in Allah's plan, especially during difficult times.
Instead of charging borrowers interest, Islamic finance uses trade-based or partnership-based models where the lender earns a profit through legitimate means, such as asset sales, leases, or investment partnerships. This ensures the loan remains halal (permissible), with transparency and fairness at its core.
Under Islamic law, a Muslim is prohibited from both paying and accepting interest. Thus, Sharia banking means money can only be parked in a bank without interest — and this money cannot be used for speculative trading, gambling, or trading in prohibited commodities such as alcohol or pork.
Allah subhanahu wa ta'ala describes the condition of these people when they are resurrected from their graves and brought back to life on the Day of Resurrection, “Those who consume interest cannot stand (on the Day of Resurrection) except as one stands who is being beaten by Satan into insanity.” Ibn 'Abbas ...