Why is Riba (Interest) Haram? Basics of Riba in Quran & Sunnah

What is Riba?

Riba (interest) in Islam means paying or receiving money or goods that exceeds the original amount being borrowed or lent. For example, if I go to someone and I borrow $1000 then after a couple of months I go to pay back this amount and the lender requests that I pay $1500 instead then the $500 amount is riba. You are forbidden from engaging in transactions that will need you to pay riba and the lender is also forbidden to ask for riba. The scenario above is very straight forward and easy to understand but things are a bit more complicated these days as the dust of riba is found on every door step. Riba comes in many different forms which may mislead some Muslims so here’s a list of the types of financial transactions that usually involve riba:

1. Personal/Business Loans

2. Home Loans (Mortgage)

3. Car Loans (Car Dealership Financing)

4. Interest-based Saving Accounts

5. Credit Cards (The use of a credit card is not considered riba if the full amount owed is paid off before the end of the billing cycle when interest begins to accumulate)

6. Mutual Funds/Retirement Saving Plans (Depends on the type of plan you sign up for so please consult with an Islamic scholar about these types of investments to ensure that they are free of riba)

Why is Riba Haram (Forbidden)?

A clear answer is given as a commandment by Allah in the Quran, chapter Al-Baqara, verse 275: ”Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like riba.” But Allah has permitted trade and has forbidden riba. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to (dealing with riba) – those are the companions of the Fire; they will abide eternally therein”.

The process of lending money in Islam is only to aid others and not to increase their financial burdens. If a person is seeking monetary gain then stay away from riba and get involved in business/trade as mentioned in the above verse. And for those who say that trade is like riba, they don’t seem to understand that Allah obligated these commandments only to protect us and to prevent the spread of corruption and injustice. Similar to the corruption that happened in the financial crisis in 2008/2009 when banks/businesses went bankrupt and people lost their investments/savings.

Also, the prophet Mohammed (PBUH) said: “May curse the receiver and the payer of interest, the one who records it and the witnesses to the transactions. They are all the same in guilt” (Sahih Muslim). I know it is very difficult in Western countries to find employment that does not engage in riba but I highly recommend you stay away from positions that may need you to deal directly with riba transactions. If you leave something for the sake of Allah, Allah will replace it for you with something better inshAllah (If Allah wills).

How Can You Create a Simple Website or Blog That ACTUALLY MAKES MONEY? Follow My FREE 6-Step Guide >>>

Consequences of Consuming Riba (Interest)

Satan and his followers are here to blind you and to make riba appear as a necessity to survive, but if you really think about it, interest is only a scam designed to put you in debt and make you consume more than what you need (loans/credit cards). Also, you must remember that you need Allah’s barakah (blessings) in your wealth, health, home, family and children. If you are consuming haram money (stolen, fraud, bribery, riba, etc.) then expect these blessings to be taken away (and Allah knows best). I understand that the poor and middle class have needs but before you ask the bank, ask Allah in your prayers and, InshAllah, He will give you the means to fulfill your needs. I will close with a verse which displays the seriousness of consuming riba: “O you who have believed, fear Allah and give up what remains (due to you) of riba, if you should be believers. And if you do not, then be informed of a war (against you) from Allah and His Messenger. But if you repent, you may have your principal – (thus) you do no wrong, nor are you wronged” (Chapter Al-Baqara, verse 278-279).

Would you like to know what else is Haram in Islam? Here’s a list of the MAJOR SINS that every Muslim should AVOID >>>

Scroll to top