Answered by: Alimah Nasima Umm Hamza
Assalamu Alaikum Wa Rahmatullah
I would like to know if the following scenario is considered as paying interest:
Buying a product on credit where they say the first 6 months are interest-free BUT every month we pay a service fee of $6 to use the service.
Is this allowed in shari’a? Or is the monthly service fee considered riba?
بسم الله الرحمن الرحيم
In the name of Allah, the Most Gracious, the Most Merciful.
If administration costs are charged on an interest-free loan then this will be permissible as you are paying for a service, however, if they are charging you to take out a loan, then this is considered riba and therefore would not be permissible.
Please note also, that any loans which stipulate that interest must be paid after a set number of months, are still interest loans and would not be permitted, because, in essence, you are signing a contract to pay interest.
وَتَعَاوَنُوا عَلَى الْبِرِّ وَالتَّقْوَىٰ ۖ وَلَا تَعَاوَنُوا عَلَى الْإِثْمِ وَالْعُدْوَانِۚ
“And cooperate in righteousness and piety, but do not cooperate in sin and aggression.” (5:2)
There are many alternative options to take except for these type of loans which look to charge interest dressed up in different names and contracts.
Only Allah Ta’ala knows best.
Written by Alimah Nasima Umm Hamza
Checked and approved by Mufti Mohammed Tosir Miah