Is it Haram to take a loan without interest? Yes or no – Specific answers

Suhel Ahmad

At present, a big question for Muslims is – Is it Haram to take a loan without interest? Taking a loan is now an important issue for us in many cases. And almost all of us know that taking loans with interest is haram. So we are concerned that a loan without interest is Haram or not.

In today’s post I am discussing – Is it Haram to take a loan without interest. Also, try to highlight what some Islamic scholars say about this. Along with that, I will attach some relevant documents, i.e. Qur’anic hadiths.

Is it Haram to take a loan without interest?

No, It’s not Haram to take a loan without interest. Islam has even strongly encouraged lending to people without interest and termed it Qarad Hasana. So if a person or an institution gives a loan without interest, then as a Muslim you can accept it.

But the present usurious social system has become so confused that no one is willing to lend to anyone without interest. Conventional banks give out loans by imposing huge interest rates on people’s heads. As a believer, you must refrain from taking loans from usurious banks.

If any bank offers a loan without interest then you can accept it. Or if you lend happiness to someone personally, then lend it to him without interest. This will count as Qarad Hasana and you will continue to be virtuous.

Some conditions of the halal loan without interest

  1. The bank cannot sell the product before it comes into its ownership or possession. That is, after requesting the product from the investee bank, the bank must first purchase it and take possession of it. Then you can sell it to the client.
  2. If the product sold by the bank to the customer is owned by the customer himself and he sells it to the bank at a lower price in cash and then buys it back at a higher price in the balance, then this transaction is haram and includes interest. That is, the product has been purchased from the person to whom it will be sold, this should not be the case.
  3. The transaction must be such that the buyer actually needs money for the product. If a cash loan is taken just by using the name of the product, without actually intending to purchase the product, then the transaction will be haram.
  4. There should be realistic buying and selling. It cannot happen that a store already has such an agreement with the bank that if we buy a product from you and sell it to the customer, he will sell it back to you at a lower price. Such excuses cannot be made.
  5. If a candidate for investment takes money from the bank in the name of purchasing things which he has already bought or used, now to pay the due price of those products or because of some other need of money, he makes Murabaha with the bank in the name of those products, then that too will be haram and Interest transactions.
  6. Another condition of Murabaha is that after the product is sold to the customer at a fixed price, it cannot be increased.
  7. No haram goods can be bought and sold.

Islamic guidance on Lending a loan without interest

Lending a loan is a good deed by which the servant earns the pleasure of Allah. It helps people, treats them kindly, and in many cases reduces or solves their problems.

The Prophet – may Allah bless him and grant him peace – said, ‘Whoever removes the worldly danger of a Muslim person, Allah Ta’ala will remove his danger in the hereafter. And whoever eases the suffering of a needy person, Allah will make it easier for him in this world and the hereafter. Allah helps a servant as long as a servant helps his brother.” (Muslim, Chapter: Zikr, Dua, Repentance and Istighfar)

The Prophet – may Allah bless him and grant him peace – said, “Whoever gives a loan to a Muslim twice, it is like giving charity once.” (Ibn Majah, Source Hasan, Irwaul Galil No. 1389)

Is it Haram to take a loan without interest
Is it Haram to take a loan without interest

Why need to take a loan without interest in Islam?

Interest in Islamic finance is known as “Riba”. Charging or paying interest is Haram. It is one of the strictest prohibitions in the Quran.

Earning money from money without participating in business economic activities is harmful for many reasons. Consequently, interest-free loans are compatible and necessary with Islamic finance principles for several reasons.

Compliance with Islamic Law: Islamic finance considers usury to be unjust and exploitative. Interest-free loans adhere to the principles of fairness and social justice as outlined in Sharia.

Avoid exploitation: Usury is a form of exploitation, as it leads to a cycle of debt and financial distress for borrowers. Interest-free loans aim to provide financial assistance without burdening individuals or businesses with interest payments.

Promotion of social welfare: Interest-based financing has negative consequences. However interest-free loans contribute to community well-being by facilitating financial support. This is in line with the broader Islamic principles of promoting social welfare and economic justice.

Encouragement of real economic activity: Interest-free financing encourages participation in real economic activity. It encourages economic growth and development of individuals and businesses. Motivates investment in productive enterprises.

Risk sharing and partnership: Islamic economics dictates risk sharing and partnership, where lenders and borrowers share the risks and profits of an enterprise. This is in contrast to conventional loans, where the burden of risk falls solely on the borrower.

In short, interest-free credit in Islam establishes moral and just financial practices in society. Stops exploitation of the poor. Contributes to the overall well-being of individuals and communities.

Five conditions make a loan halal.

Five conditions make a loan halal. The purpose of the loan must be to cover a need and not for luxury or enjoyment. must repay the loan with interest (interest is not considered haram but acceptable).

If you’re borrowing money from a family member and there is no interest charged on the loan, Then this condition does not apply to your situation (however, if you don’t plan on paying them back, it would still be considered usury).

The loan must be for a specific amount owed at the beginning of the contract (and agreed upon by both parties).

If you give someone $10 today and they promise to pay it back in 10 days but change their mind two days later

because they’re broke now—this contract isn’t valid anymore because you’ve both changed your minds about how much money should change hands between each other within that period!

You can only have one agreement at any given moment; otherwise, it becomes unclear what will happen next.”


Is it permissible to take a loan without interest in Islam?

Yes, borrowing without interest is not only permissible in Islam but Islam has instructed its followers to do so. Conversely, “riba” is expressly Haram in Islamic finance.

What are the specific conditions for interest-free loans to be lawful?

Yes, for the loan to be halal, it must be free of any interest or additional charges. Both parties should agree on the terms and conditions in advance.

Can lenders benefit in any way from interest-free loans?

No, the donor cannot benefit from the recipient in any way. It is also a form of interest.

Is there a difference between interest-free loans and gifts in Islam?

Yes, there is a difference. An interest-free loan involves repayment when a gift is made without expectation of repayment. Both are encouraged in Islam, but they serve different purposes.

Are there alternatives to conventional loans for Muslims?

Yes, Islamic finance offers options such as Mudarabah (profit sharing), Musharakah (partnership), and Ijara (leasing) that adhere to Shariah principles.

What are the precautions to be taken in interest interest-free loan agreement?

Clear and transparent communication, a written agreement outlining the terms and conditions. Ensure that both parties adhere to the same principles.

A Conclusion

Interest-free loans are not Haram in Islam, but interest-free loans are encouraged by Islam. Loans without interest are identified as Qarade Hasana in Islam. So any person can take the loan without interest. But there are some conditions. Those conditions must be followed. But usurious loans are forbidden in Islam and are a terrible sin.

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