Fatwa: # 45880
Category: Business Matters
Country: African Country
Date: 5th August 2020


Excess on a loan - Is this permissible?



I was wondering if the following loan payment system would be permissible:


So this is how it works:

1. Enter in the amount of money you need.

2. The App will then give you a fixed loan fee, and repayment rate.

So for a $500 loan, you need to pay $568 preferably within 18 months. And 1% (repayment rate) of your daily business sales will automatically go to Square Space. If you are closed on a certain day, then no fees will be charged. 

You are required to pay at least 1/18th of your initial loan balance every 60 days. This will cover only half your original loan amount. 

If you have an outstanding balance on the due date, then they may increase the repayment rate and initiate a debit from your Square-linked bank account for the remaining loan balance.

There are no ongoing application, closing, or late fees. Just one fixed amount that needs to be payed back.


In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

In principle, any excess on a loan will be interest even if the fee is fixed. The fixed fee on the loan will be interest. Hence, not permissible.


And Allah Ta’ala Knows best

M. Akhtar

Student Darul Iftaa
South Africa

Checked and Approved by,
Mufti Ebrahim Desai.

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