Ribah
Question
Hello,I am using digital bank application,in which they have a feature of spliting your payment into 3 instalments and charging Annual Percentage Rate (APR) which is 6.33% for example i have purchased somthing from shop and made a payment by using that bank app which is 80.32 euro,so my bank can charge me 80.32 euro with 3 instalment of 26.94(1st month)+26.94(2nd month)+26.94(3rd month)+0.50 bank fee(i guess it is a APR whihc is 6.33%).Please guide me can i use this option?Jazakallah
Answer
Wa ‘alaykum as-salām wa raḥmatullāhi wa barakātuhu,
Based on the information given and our understanding of the query, the extra amount of 6.33% is linked to the APR (Annual Percentage Rate). This indicates that the fee is calculated as a percentage of the principal amount over the period of the installments. Therefore, this is not a mere service or administrative charge but rather an interest charge.
Islamic Ruling:
- Nature of APR:
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- APR represents the annual cost of borrowing money, including interest and fees. When an extra amount is charged based on the APR, it clearly constitutes interest (Ribā).
- Definition of Interest (Ribā):
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- In Islam, any guaranteed increment over the principal amount, which is not in exchange for a legitimate service or goods, is considered ribā.
- Prohibition of Ribā:
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- Ribā is strictly prohibited in Islam as per the Qur’ān and Sunnah. Engaging in transactions involving Ribā is a major sin.
Practical Guidance:
- Avoid APR-based Options:
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- Since the 6.33% is indeed interest, avoid using this option for installment payments.
- Seek Halal Alternatives:
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- If an item is unaffordable, consider saving for a few months until you can purchase it outright.
- In urgent cases where immediate acquisition is necessary, and funds are insufficient, seek financial assistance from friends or family.
- Explore Shariah-compliant installment plans that do not involve interest.
- Identify payment plans where any additional charges are fixed administrative fees, not linked to the loan amount or duration.
Conclusion:
Since the extra amount of 6.33% is linked to the APR, it is clear that this is interest, and not a valid service or admin charge for facilitating the installment payments. Engaging in such transactions involves Ribā, which is prohibited in Islam.
And Allah subhanahu wa ta’ala knows best.