Is It Permissible to Take a New Interest-Based Loan to Repay Existing Interest-Based Debts When No Alternative Is Available?

"Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity."

"Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever."

"And if you do not, then be informed of a war [against you] from Allah and His Messenger."

These verses demonstrate that riba is among the gravest prohibitions and that Allah has threatened those who engage in it with a severe warning, the like of which has not been mentioned regarding many other sins.

"Avoid the seven destructive sins." They asked, "O Messenger of Allah, what are they?" He ﷺ said: "Associating partners with Allah, practicing magic, killing a soul which Allah has forbidden except by right, consuming riba, consuming the property of an orphan, fleeing from the battlefield, and accusing chaste, believing, unsuspecting women of adultery."

Thus, the Prophet ﷺ counted consuming riba among the seven destructive sins, meaning those that lead to destruction.

"The Messenger of Allah ﷺ cursed the one who consumes riba, the one who pays it, the one who records it, and its two witnesses, and he said: 'They are all equal.'"

This hadith demonstrates that the prohibition is not limited to the person who receives interest. Rather, it also includes the person who pays it in a prohibited interest-based contract, as well as the one who writes the contract and those who witness it. Therefore, a Muslim should reflect upon the danger of entering into these transactions. A person may escape a temporary financial difficulty, but in doing so, he exposes himself to a tremendous sin and a severe warning.

"One dirham of riba that a man knowingly consumes is worse than committing zina thirty-six times." [Shaykh al-Albani رحمه الله authenticated it in Sahih al-Jami, no. 3375.]

"Riba has seventy-three doors, the least severe of which is like a man having intercourse with his mother."

This meaning has been reported through several narrations, and Shaykh al-Albani رحمه الله authenticated some of its chains of narration in Sahih al-Jami, no. 3539. These hadiths contain extremely severe warnings concerning riba and explain the gravity of its sin and danger, which obligates a Muslim to beware of it and avoid all its forms. If such a severe warning has been mentioned concerning a single dirham of riba, then what about someone who takes lightly the act of entering into large interest-based contracts that continue for many years?! Despite the severity of this warning, the door of repentance remains open for anyone who has fallen into riba. Allah is Most Forgiving and Most Merciful to those who repent, return to Him, and abandon their sins.

"But Allah has permitted trade and has forbidden interest."

"But if you repent, you may have your principal - [thus] you do no wrong, nor are you wronged."

Therefore, whoever wishes to repent from riba must stop entering into new interest-based contracts and strive to free himself from previous contracts through whatever permissible means are available to him. The ruling does not change merely because the new loan would reduce his installments to less than 40% of his salary. A lower installment does not change the nature of the contract if it remains an interest-based loan.

"Prohibited food is not made permissible except in cases of necessity involving severe hunger and starvation. As for prohibited clothing, it may become permissible due to necessity and also due to need. This is what has been established in the Sunnah. What Allah has distinguished must not be treated as the same, and the distinction between necessities and needs is well known in many matters of Shariah."

Accordingly, not every financial difficulty or inability to repay installments constitutes a necessity that permits borrowing with interest.

He was asked about borrowing money from a bank with interest when there is a severe need for money. He replied: "As for taking a loan with interest, it is not permissible, even if you are in need, whether for marriage or to repay a debt. You must never take an interest-based loan."

He advised seeking an interest-free loan or using permissible financial transactions instead of an interest-based loan. This statement clearly establishes that merely needing to repay a debt does not make an interest-based loan permissible.

"And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, then it is better for you, if you only knew."

This verse establishes an important principle regarding the obligation to grant additional time to an insolvent debtor until he becomes capable of repayment.

"Whoever takes people's wealth intending to repay it, Allah will repay it on his behalf. And whoever takes it intending to destroy it, Allah will destroy him."

"Say, 'O My servants who have transgressed against themselves [by sinning], do not despair of the mercy of Allah. Indeed, Allah forgives all sins. Indeed, it is He who is the Forgiving, the Merciful.'"

Therefore, the questioner must beware of the tremendous sin of riba while not despairing of Allah's mercy. Whoever is sincere in his repentance, Allah accepts his repentance. Shaykh Ibn Baz رحمه الله was asked about borrowing with interest to repay debts, and he ruled that it is prohibited. He also reminded people of the obligation to grant additional time to an insolvent debtor. His answer applies to the fundamental issue raised by the questioner.