A Loan with Very Low Interest

Assalamu Alaykum,

I found one of the non-bank financial institution offer a very low interest loan. I am interested to take one to buy a car. But some fellow Muslims say it is haram. Others say it is allowed as the interest is very low. Please clarify this to me. Thank you!

Waalaykum Salam,

Interest is another name of riba, and it is clearly haram in Islam either high or low rates. As a good Muslim, it is your responsibility to avoid dealing with interest even though it is difficult. In this case, you found a very low-interest loan is very tempting and affordable for you.

But again, interest is haram regardless of whether the rate is low or high. Of course, the lower rate makes it tempting for everyone.

Interest is prohibited because a loan creates money on top of money without involving any risk. The borrower must bear all the risk while he still has to pay extra money for his debt. Therefore, interest leads to injustice (zulm).

Alternatively, you can opt for Islamic financing although the price is higher; or you can wait until you save the price for buying the car.

Allah knows best.