Question Summary:
Is it permissible to take out the loan knowing that one will be able to pay it back fully before any interest is due from the student?

Question Detail:

 
 
In clarification of my question 34023:
 
The student takes out a loan from the bank.  Interest is due immediately but the government pays the interest while the student is studying. A month after the student graduates the government stops paying  interest,  the student then starts repayment including interest.  The student has the option to pay back the loan in full at any time therfore providing the loan is paid back before the first installment is due no interest will be due from the individual.  
 
Is it permissible to take out the loan knowing that one will be able to pay it back fully before any interest is due from the student?
 
 

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
 
 
In principle and in general[1], it is prohibited to take out an interest bearing loan.  The very contract itself is prohibited even though one may pay the loan timeously and avoid paying interest.
Allah Ta`ala says;
{ يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278) فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ } [البقرة: 278، 279]
Translation:
“O you who believe fear Allah and leave out the remains of riba, if you are (true) believers. If you do not (avoid interest), then be warned of war with Allah and His Messenger.” (Quran, 2:278)[2]
As stated above that this is a principle and a general ruling. If one is faced with a dire financial situation, then contact your local Mufti to advice you accordingly.
 
And Allah Ta’āla Knows Best
Hafizurrahman Fatehmahomed
Student Darul Iftaa
Netherlands
Checked and Approved by,
Mufti Ebrahim Desai.