Answered by Ustadh Salman Younas
Question: Assalam aleykum
I have taken a bank loan on interest for my education few years back. Now I am earning and can pay the loan with interest. Is it better for me to pay the loan with interest which I agreed upon the bank initially or just pay the amount I have taken from the bank, hence doing a settlement such that I pay only what I have borrowed?
Answer: assalamu alaykum
If you can arrange to have the interest waived and pay the principal of the loan only, then it would be necessary for you to take this option and to take all reasonable means to come to an agreement with your lender where you will not have to pay interest. As you know, interest is clearly prohibited in the Quranic verse, “God has permitted sales and prohibited interest.” (2:275)
If you cannot reach an agreement where all the interest is waived, then you should at least try to have some of it waived. In the case where the lender demands you do pay off some or all of the interest accrued on your loan, you can do so if there are negative consequences feared in not doing so, such as being sued or losing one’s creditworthiness that makes aspects of modern life much more difficult (e.g. renting/buying a home).
[Ustadh] Salman Younas
Checked and approved by Shaykh Faraz Rabbani
Ustadh Salman Younas graduated from Stony Brook University with a degree in Political Science and Religious Studies. After studying the Islamic sciences online and with local scholars in New York, Ustadh Salman moved to Amman where he spent five years studying Islamic law, legal methodology, belief, hadith methodology, logic, Arabic, and tafsir. He is currently a PhD candidate at the University of Oxford and continues his traditional studies with scholars in the United Kingdom.