An employee given an interest free loan but in case of his resignation he will be charged interest

19-3-2007 | IslamWeb

Question:

The company I work for offers an interest free housing loan. However, upon resignation the company reserves the right to charge interest on the balance amount. So far no one who has resigned has been charged interest. If I have the means to clear the loan whenever I resign, does the provision to charge interest make the loan unlawful?

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Answer:

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.

 

The loan which you inquired about in the question is a loan which involves Ribaa (interest and usury) and it is forbidden due to the existence of the condition of Ribaa in it. The debtor conditioned a benefit in return for lending that loan; the condition is that the employee should continue working for him for a specified period of time. It is known that any loan that yields a benefit is forbidden. Ibn Dhuwayyaan from the Hanbali School of jurisprudence, said: "Any loan that yields a benefit is forbidden, such as the debtor giving his house for the creditor to live in, or lends it for him, or does a work for him and the like (in return for lending him)." Putting the condition which you mentioned in the question makes things worse because entering a contract which contains a forbidden condition is not permissible in principle, as by doing so, one is pleased and confirms falsehood, even if the person who enters such a contract knows that he can avoid the Ribaa.

For more benefit, please refer to Fatwa 90131. 

Allaah Knows best.