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He took a loan from a riba-based bank; does he have to do pay zakaah on what he borrowed.halal personal loans usa?

I took a loan of 100,000 riyals from a riba-based bank because I was in urgent need of this money, on the basis that I would pay it back to the bank in five years. I have had this money for an entire year without achieving what I borrowed it for. Do I have to pay zakaah? And is it halaal and is it permissible for me to benefit from it or what? 
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Praise be to Allaah.

Firstly: 

It is not permissible to take loans from banks or other institutions on the basis that interest will be paid to the lender, even if that is for a case of need, because the purpose of giving loans is to show kindness and help one who is in need. If it is stipulated that there should be some benefit (to the lender) such as paying back the loan with an extra amount, this defeats the purpose. The basic principle is that every loan which brings a benefit is riba. 

Shaykh Ibn Baaz (may Allah have mercy on him) was asked: Is it permissible to borrow from riba-based banks in order to compete with the missionaries with the aim of saving Muslims from Christianisation? 

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He replied: If the loan involves riba or interest, then it is not permissible according to the consensus of the early generations of the ummah, because the evidence from the Qur’aan and Sunnah indicates that that is haraam even if it is for a noble aim, because noble aims do not justify haraam means, or make them permissible. But if the loan is without interest, there is nothing wrong with it, although it is better to borrow from those whose wealth is free of riba and that is more on the safe side, if it is possible. 

What you have to do is repent to Allah from this haraam action, regret what you have done, give it up, and resolve not to do it again. But you do not have to do anything other than return the loan that you took, without interest. If you are compelled to pay the additional amount, in that case there is no blame on you and the sin is on them – if you have repented and regretted what you did. 

Borrowing from the bank to buy a house

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I am an employee… My problem has to do with our family’s house. This house belonged to my grandfather (may Allah have mercy on him), and after his death it came into the possession of his eight children, five males and three females, and my grandmother. I am the son of the oldest son who paid fifty-percent of the costs of building the house, and I expanded it. … One paternal uncle lives in the house, and he is married with two sons. My family and paternal uncles and aunts all have their own houses and do not need this house. My question is: I want to buy this house with a loan from the bank, from my uncles and aunts because I need it. … Is this permissible according to sharee‘ah?

Loans from banks are of two types: 

1.A “goodly loan” (qard hasan) which does not involve any additional payment (interest); there is nothing wrong with this;

2.A loan with interest, which is riba, and there is scholarly consensus that it is haraam. It is not permissible except in cases of urgent  necessity which cannot be met except by taking out a riba-based loan. The need for housing does not reach a level which makes it permissible to deal with riba, because this need can be met by renting. So it is not permissible to take out a riba-based loan in order to buy a house.

Ibn Qudaamah (may Allah have mercy on him) said:

“Every loan in which it is stipulated that something extra must be paid back is haraam, with no difference of scholarly opinion. Ibn al-Mundhir said: [the scholars] are unanimously agreed that if the lender stipulates that the borrower must pay extra or give him a gift, and he lends him money on that basis, then accepting the extra payment is riba. It was narrated from Ubayy ibn Ka’b, Ibn ‘Abbaas and Ibn Mas’ood that they forbade every loan that brings benefits, because loans should be given as an act of kindness and an act of worship aimed at bringing one closer to Allaah. So if there is a stipulation of extra payment, this diverts the loan from its purpose.” 

Al-Mughni, 6/436

This applies if the aim is take out a loan from the bank that clearly involves interest. 

If the aim is to buy a house through the bank, this also is of two types: 

1.The role of the bank is to finance the purchase in return for interest, so it pays the price of the house for you, on condition that you will pay it off in instalments in return for interest that will be taken from the bank. This is a riba-based loan and is haraam.

2.The bank buys the house for itself first, then sells it to you for a higher price, in instalments. There is nothing wrong with this, but it is essential that the contract be free of any stipulation of riba, which is the condition that a penalty be paid in the event of any delay in paying the instalments, because stipulating this penalty is riba and is haraam.

It is no secret to you that riba is a major sin, and there are stern warnings concerning it that are not given for other sins; Allah threatens war to the one who commits this sin and He told His Prophet (blessings and peace of Allah be upon him) that there is a curse upon the one who consumes riba and the one who pays it. This is a strong warning against falling into this evil. 

“O you who believe! Fear Allaah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers.

279. And if you do not do it, then take a notice of war from Allaah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279].

Muslim narrated (1598) that Jaabir (may Allah be pleased with him) said: The Messenger of Allaah (blessings and peace of Allaah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

And the Prophet (blessings and peace of Allah be upon him) said: “A dirham of riba that a man consumes knowingly is worse before Allah than thirty-six acts of zina (adultery). Narrated by Ahmad and al-Tabaraani; classed as saheeh by al-Albaani in Saheeh al-Jaami‘, no. 3375 

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Is it permissible to open current accounts in riba-based banks to make things easier for customers?

I am currently setting up an online store, and I will – by Allah’s leave – in most cases receive payments via bank transfers. Is it permissible to open a current account in all banks, including those that are riba-based, so as to make things easier for customers? That is because each customer will usually have a bank, and if the transfer is made to the same bank, the transfer will be quicker, but if it is from one bank to another, then the transfer may take twenty-four hours, in addition to the imposition of fees on the sender. I intend, by Allah’s leave, to open the accounts and give the customer information on the appropriate account, depending on what bank he uses. In sha Allah I will withdraw the money after it is transferred, and keep it in banks which I know are Islamic. islamic bank business loan

With regard to this issue, what is unanimously agreed upon to be prohibited is opening an account in a riba-based bank, depositing money in it, and taking the riba or interest that is paid on it.

As for simply opening an account in these banks without riba or interest – whether that means making deposits as well, or not – this is something concerning which the scholars differed; some of them disallow it and some permit it.

Undoubtedly the most prudent approach is not to open any account at all in any riba-based bank, except in cases of necessity.

One of the needs that make it permissible to do that is the need to protect one’s money, or if a person is a businessman and it will be detrimental to his commercial interests if he does not have any accounts in these banks, or his salary is deposited in such a bank and he cannot access it except by opening an account in that bank – and other considerable needs.

A number of trustworthy scholars have stated that a concession is granted allowing that in the case of need.

One of the questions addressed by a charitable organisation called Jam‘iyyat al-Birr to the Standing Committee for Issuing Fatwas had to do with the fact that the organisation has a number of accounts in local banks, for the purpose of making it easy for donations, subscriptions, zakaah, charity and other funds to reach the organisation via its various accounts, and so as to make it easy for individuals, banks and companies to make payments, as the organisation’s accounts were accessible to every organisation or individual. We are presenting this case to you, so that you may advise us as you see fit.

The response was:

There is nothing wrong with opening bank accounts for a charitable or other organisation, if the purpose in doing so is what is mentioned in the question, because that makes things easier for people and removes hindrances. What is prohibited is to open an account for the purpose of prohibited types of investment and taking riba or interest payments on the deposits, because of the hadith which says that the Messenger of Allah cursed the one who consumes riba, the one who pays it, the two who witness it and the one who writes it down.

End quote from Fataawa al-Lajnah ad-Daa’imah (13/375)

Shaykh Ibn Baaz (may Allah have mercy on him) said:

There is nothing wrong with putting money in banks without interest, if there is a need to do so, but if it is possible to deposit it in other types of banks, that is more prudent and is better, acting in accordance with the words of the Prophet (blessings and peace of Allah be upon him): “Leave that which makes you doubtful that which does not make you doubt.” And he (blessings and peace of Allah be upon him) said: “Whoever avoids that which is dubious will have protected his religious commitment and his honour.”

End quote from Majmoo‘ Fataawa Ibn Baaz (19/413).

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: If you need to open an account in a riba-based bank, there is nothing wrong with it, but if you do not need to do so, then do not do it.

End quote from Liqa’ al-Baab al-Maftooh (22/180).

Shaykh ‘Abd al-‘Azeez ar-Raajihi was asked:

What is the ruling on opening a current account in riba-based banks if one does not take the interest that is paid on it?

He said: If a person needs to do that or is compelled to do so, there is nothing wrong with it, but he should not take the interest. But if he can do without that, that is preferable.

End quote from Fataawa Munawwa‘ah (23/35) halal inc

Ruling on depositing money in the bank, and interest

We are indian citizens.we deposite money in the bank...how to deal with the interest given by banks.

Depositing money in the bank in return for interest is riba (usury), which is a major sin. Allaah says (interpretation of the meaning): 

“O you who believe! Be afraid of Allaah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers.

279. And if you do not do it, then take a notice of war from Allaah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279]

If a Muslim is forced to put his money in the bank, because he cannot find any other means of keeping his money safe apart from putting it in the bank, then there is no sin in that, in sha Allaah, subject to two conditions:

1-That he does not take any interest in return

2-That the bank does not deal only with interest, rather it should have some other activities that are permissible in which it invests the money deposited. See questions no. 22392 and 49677

It is not permissible to make use of the interest (riba) which the banks pay to their customers. They must get rid of it by donating it to charitable causes. 

The Scholars of the Standing Committee for Issuing Fatwas said:  

The interest which the banks pay to depositors on the money that they deposit in them is regarded as riba (usury). It is not permissible to make use of this interest, and the customer must repent to Allaah from depositing his money in riba-based banks. He should withdraw the money that he deposited and the interest, keep the original amount and donate the extra to charity, to the poor and needy or for renovating public facilities etc. 

Fataawa Islamiyyah, 2/404 

And Shaykh ‘Abd al-‘Azeez ibn Baaz (may Allaah have mercy on him) said:

With regard to the interest that the bank gives to you, do not give it back to the bank and do not keep it, rather spend it on charitable causes such as giving it to the poor, renovating public washrooms, helping debtors who are unable to pay off their loans, etc.

Fataawa Islamiyyah, 2/407  halal real estate investment

He opened an account in the bank, and they gave him life insurance for free

I opened a salary account and I got a life insurance for free and the banker said you should swipe the card in order to keep the insurance valid or else it will be rejected I really don't need this insurance as it is Haram but daily life requires some swipe sometimes so what should I do? Do I not swipe at all and have electronic transactions only? And one more thing if I don't swipe for 3 months the insurance will be rejected so should I wait for 3 months?

With regard to opening an account in a riba-based bank, in principle, what is agreed upon is that what is prohibited in this regard is opening an account in a riba-based bank, depositing money in it, and taking the interest that is paid on it.

As for simply opening an account in such banks without interest – whether one deposits money or not – this is a matter concerning which the scholars differed as to whether it is disallowed or permissible.

Undoubtedly it is more prudent, and more on the safe side, not to open any account in a riba-based bank, unless there is a need that dictates doing so.

Among the needs which would make doing that permissible is the need to protect one’s money, or if a person is engaged in trade and his commercial interests will be adversely affected if he does not have accounts in such banks, or if his employer only pays salaries by depositing them in bank accounts, and he cannot receive it unless he opens a bank account, and other such genuine needs.

A number of trustworthy scholars have stated that concessions are allowed in the case of such needs.

Please see the answer to question no. 226729.

Secondly:

It is permissible to use debit cards to make withdrawals.

As for credit cards, they are not permissible unless they are free of features concerning which there are reservations according to Islamic teachings. See the answer to question no. 97530.

Thirdly:

Commercial insurance is prohibited in all forms, because it is based on riba (usury) and gambling.

See the answer to question no. 36955.

If the bank gives you life insurance without you requesting it, then you have to refuse it, because a gift in return for a loan is haraam.

The way in which a current account in the bank to be described from a shar‘i point of view is that it is a loan from you to the bank, so you must refuse this insurance. If you can only refuse it by refraining from using the credit card for a while, then you must do that.

It says in a statement of the International Islamic Fiqh Council no. 9/3/86, regarding bank accounts:

After studying the research papers submitted to the Council on the topic of savings accounts, and after listening to the discussion that took place on this topic, and the discussion on current accounts, whether they are in Islamic banks or riba-based banks, [the Council determined that these accounts are to be regarded] from a shar‘i point of view as loans, because the bank becomes liable for the money deposited in these accounts, and is obligated according to shari‘ah to return the money upon request. The ruling that it constitutes a loan is not affected by the fact that the bank (the borrower) is very well off. End quote.

Al-Bukhaari narrated in his Saheeh (3814) that Abu Burdah said: I came to Madinah and met ‘Abdullah ibn Salaam (may Allah be pleased with him). He said to me: You live in a land where riba is widely practised. If a man owes you something and he offers you a load of straw, or a load of barley, or a load of clover, do not accept it, for it is riba. Clover is a plant eaten by animals.

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Similar reports were narrated from a number of the Sahaabah.

And Allah knows best.