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IslamQA: Are student loans, mortgages and credit cards haram in the West?

Are student loans haram? what if one is unable to pay for school? are credit cards/mortgages in the West haram?

Yes, they are all haram unless a person is unable to avoid them. Ideally a Muslim who is able should avoid all of them. They fall on a spectrum when it comes to how bad each of these things is. It depends on a person’s situation. For example using a credit card to buy a bigger television is unjustifiable and therefore extremely disliked by God. But a person whose family is hungry and needs to buy groceries and has no money except credit may use it and God can be expected to forgive it.

So, in general, all interest-bearing loans are a way of dealing with usury, which Islam forbids. It is an evil thing that may be excused due to great need. Ideally we should always try to reduce our use of them and plan to completely avoid them if possible.

Mortgages may be considered to be on the “extremely evil” side because a person takes out a mortgage in expectation of gain and avoidance of loss, rather than due to immense need. They always have the option of renting. (Today there are companies like Guidance Residential that offer halal mortgages).

As for a student loan, because a degree is so important for one’s future, it may be considered “moderately evil”. Since they are so necessary for a good career, it can be argued that they are justified. This is a choice that each person should make for themselves, but personally I do not condemn someone who uses them.

Car loans depend on a person’s need for it. If that is the only way they can get to work or get to the places they need (for example if they live in certain US suburbs where the closest store is many miles away) then that is justifiable. But a person who does not have a strong need for it is spiritually better off if they use public transport. And a car loan is especially bad if a person uses it to upgrade their car when there is no strong need for it.

And God knows best.
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