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Ruling on Charging an Additional Amount against Delaying Payment

Answered according to Shafi'i Fiqh by Darul Iftaa Jordan
I have purchased a car through an Islamic bank on basis of Murabaha and I want to delay paying off next month`s installment. However, the bank employee told me that I have to pay ten JDs as a fee. Is this permissible?

Answer:

 Praise be to Allah the Lord of the Worlds.

  In principle, in installment sale, installments must be paid on their due time, but there is no blame in delaying some by mutual agreement provided that no additional amount is added and the deal isn`t prolonged. It isn`t permissible for the bank to charge any additional amount in return for delaying payment, because the installment is a debt, which the debtor must pay on due time. If the delay was granted in return for adding a certain amount, then this is Haram (Forbidden) on the grounds that it is Riba {Usury/interest}. This actually prevailed in pre-Islamic period where the debtor used to say to the indebted, "You either pay off the debt or add an amount to it."

 Moreover, calling this addition "Administrative Fee" doesn`t make it other than Riba. However, if the bank uses the addition to cover administrative expenses- such as stamps and the like-without making any profit out of it, then it is permissible. And Allah the Almighty knows best.

This answer was collected from the official government Iftaa Department of Jordan.

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