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Muslim’s Guide to Debt and Money Management Part 6

Omar Usman

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Intro | Part 1 | Part 2 | Part 3 | Part 4 | Part 5

V. Cars, Houses, and ….. oh yes… STUDENT LOANS

So now we have learned insha’Allah how to budget our money, and implemented a strategy to knock out our credit cards and other debts. We have 1k in savings. Now we move to the next steps. Ideally, a person should start focusing on creating an emergency fund – 6 months worth of expenses (not income) set aside for a rainy day.

Most people now after knocking out these major debts, are worried about cars and houses – and let’s not forget student loans. We’ll look at cars and houses first.

One disclaimer before continuing this article. If it has not already become readily apparent, the 3 main sources I am using for my research are:

  1. AMJA
  2. Lectures by Sh. Ghassan Barqawi
  3. Total Money Makeover by David Ramsey

The reason for the first two sources is because from my own personal research in the English language I felt that they provided the best rulings on contemporary finance issues due to not only their Shari’ expertise, but their experience and expertise with the finance system that we live with and deal with on a day to day basis (most specifically in America). In the sources I was able to come across, no one else dealt with these issues in as much depth as they did. As far as the Ramsey book goes, then I elaborated on this in a previous post in this series. It is hands down the best personal finance book I have ever read, and overall the most in tune with the basic principles taught to us in Islam – namely that of avoiding debts and interest.

Car Buying

Car buying in America is a nauseating experience. There’s so many variables and factors, and let’s be honest – there isn’t a single contract out there that’s 100% halal. This includes lease contracts, purchase/finance, etc. As far as car leasing goes, it seems on the outset to be halal since its like a fixed rental agreement. Fiscally speaking though, it’s a really bad contract to get into. Plus, our goal is to be debt free and emancipated from monthly payment slavery. How else are you going to build wealth?

Leasing: I’m not personally sold on leasing as a halal alternative. First of all, they use some type of interest in calculating the amount (which according to some is irrelevant since they quote a fixed price to you). Secondly, the contract itself includes a purchase option at the end of the lease, which according to some scholars is an invalid condition since it’s 2 contracts in one (a sale and a lease). But it does at least seem more lawful than any of the purchase options they have. Conclusion: I wasn’t able to find anything conclusive from any scholar who has analyzed the leasing arrangement offered by automobile dealerships here and given a ruling, if anyone has, please post it.

Buying: There seems to be 2 things here. First, is financing a car purhcase by a third party, whether its your bank or the car company hooking it up through someone. That is definitely money for money, and then money for car. The second one is when the car dealership sells you the car directly at a fixed price (even though they worked interest into the amount). For example, the car dealership says “we sell you this car for $250/month for 60 months” – again same conclusion. If anyone has anything conclusive in the halal/haram sense, please post it.

Now that the halal/haram factor is out of the way (not really since I don’t have any real answers) let’s step back and look at it fiscally now. The best advice I found on this topic was from Dave Ramsey (surprise). His recommendation: Don’t waste money on new cars, they depreciate in value way too quickly. It’s like buying a Lexus, driving out of the dealership and throwing $100 bills out of the window – that’s how quickly your car loses value. A lease is similar, you don’t own it and you are bound by mileage requirements and other conditions.

The best thing to do is find a moderately used car, something reliable and gas efficient, and buy it on cash. Again, big surprise. If you’re driving a clunker, and need a new car, ride it out until you can buy something better on cash. This is where the previous steps come into play of living frugally and putting money into savings, and being free of debts. This is the tool to freeing up cash to be able to do things like put 10k on the table to buy a car on cash. It’s a long process that takes discipline – but then that’s really the big story of money isn’t it? If you buy a car for 1k, and save for a year the $300/month you would put towards a payment, after one year of toughing it out, you can buy a $3600 car on cash. Do it again for another 2 years, and you can upgrade. But all the while – you are financially independent which is the ultimate dream isn’t it? If you lose your job, you don’t have to worry about your car getting repo’ed after 4 weeks if you are behind on the payment.

Also, that monthly payment (the average for American households is about $450/month) can go a long way towards debt reduction or saving. Especially if you are planning to buy a house, thats another easy 25k you can save in 5 years if you have a reliable car you got on cash, such as used Accord or Camry, that lasts during that time.

Ramsey gives an interesting breakdown of leasing in his book. If you rent a car worth $22,000 for 3 years, at the end of the lease it is worth about $10,000. The monthly payment not only covers that depreciation, but also the interest amount built into the payment which gives the car dealership profit. Just covering the loss would be a monthly payment of $333. Plus you have to pay per mile if you go over the allotted amount (usually about 12k miles for one year). On top of this, if the car is not returned in mint condition, the dealership will charge you for excessive wear and tear.

The last statement I will make about cars is that no one disagrees on the fact that the most halal and undisputed way of buying a car is to lay down the cash and buy it straight up. Even if it means getting a used car instead of a new one, but insha’Allah Allah (swt) will put more barakah in that car. Maybe it won’t break down, maybe you won’t get into a car wreck, maybe your car insurance will be cheaper, maybe you will save money on gas and maintenance, and maybe it won’t get totaled or die forcing you to get a new one. All kinds of things can happen that are not in our hands. Insha’Allah if we do our best to have taqwa, Allah (swt) will protect us and our property.

Houses

I’m not going to beat around the bush here. Mortgages are haram according to practically every scholar I have heard discuss this issue. It is straight up money for money. The question arises with Islamic mortgage companies. According to AMJA, the contracts they utilize are not Islamically sound. Some companies are also known to sell off the debt to other corporations like Fannie Mae after taking your contract. Anyone interested can listen to these CD’s – How to Buy a House Islamically by Sh. Ghassan Barqawi. AMJA’s website also has more information on specific companies and their schemes. One thing of note, oftentimes the “shari’ah” endorsements on the websites of these companies are given to a general scheme, and not necessarily to the specific contract the company ends up utilizing, so do not let that mislead you. Most of the contracts used still have interest, but just under different names.

Regarding buying a house through a bank due to necessity, AMJA gave the following ruling,

AMJA asserts that banks’ interest is prohibited riba; therefore, acquiring loans from banks is prohibited except in the case of necessity as defined by Islamic law. This is true whether the acquired loans are for building homes or otherwise. Moreover, necessity should meet the following Islamic prerequisites:

a) In order for necessity to be considered from Islamic perspective it must be a reality not a speculation. This means that a real danger against one’s creed, soul, reasoning ability, offspring, or wealth must already or most probably be in existence. This is the condition that justifies doing what otherwise is prohibited.

b) The danger should be of an urgent nature such as danger of death, or losing a limb or its function if one does not commit what is prohibited.

c) Lacking other lawful alternatives.


AMJA also asserts that general need may take the ruling of necessity in permitting what otherwise is prohibited, provided that the prerequisites of this maxim are met, such as:

a) The materialization of need as defined by Islamic law. Islamic law defines need as the repulsion of harm and physical weakness, which prevents people from taking part in the hustle and bustle of daily life.

b) Lack of other permissible alternatives such that the unlawful covers all areas of the earth and that all means of earning are corrupted, so that the people find no way at all to seek the lawful.

c) To keep within the boundaries of need, otherwise all that relates to comfort and luxury remains prohibited.

d) Inability to move to other places where one can find legitimate alternative.


AMJA’s resolution in this regard explains that the person who cannot afford to buy a home through an interest-free, permissible means should be content with renting.


Renting a residence provides a way out from falling into the riba that is prohibited by Allah and His Messenger. However, if renting becomes extremely hard for some people due to irreconcilable considerations such as the number of family members that exceeds what is allowable in a rented place, an amount of rent that supercedes the family’s financial capacity or any other legitimate urgencies, then, it becomes permissible to use mortgage in light of the aforementioned governing principles.


Nonetheless, this permission can only be used after referring to the people of knowledge, in order to estimate the extension of the need, and to ensure that the prerequisites of necessity-like need are fulfilled. (source)

Now, as far as the contemporary “Islamic Finance” schemes are concerned, the most popular among them is the co-ownership scheme. This is where you buy the house as ‘partners’ and then you pay rent on the portion which you do not own. For a detailed discussion of this contract, listen to the CD set by Sh. Ghassan linked to above. Even a cursory glance at their contract/scheme looks like it is interest with a different name. In fact, I will tell you exactly what happened to me while writing this. I found the declining ownership percentage/payment chart of one of these Islamic companies, and compared it to a mortgage amortization chart. The columns in both are exactly the same. In fact, the only difference is that the words “principle” and “interest” have been changed to “RofC” and “RonC” [Return of Capital (principal), and Return on Capital (interest)]. It also took me less than 5 minutes to take the example chart they Islamic company had on its site, play around with an amortization calculator, and figure out exactly what interest rate they used in the example chart on their site (you might save money going through the bank ;)).

Alhamdulillah though, for Muslims in America it seems there is one company that has gotten the approval of even AMJA, and that is Devon Bank. You can see the relevant fatwa here, and go through the financial section at AMJA’s website for more details.

But of course as has been the theme here, let’s step back and look at it fiscally. If your mind is already made up on buying a house, then from the research above, Devon is the best way to go. And looking at Devon, I would say unless you’re ready to put serious money down – like 25-50% down, then it might be a lot of money to go through them. But then, that should tell us something too. If we can’t afford it – it means we can’t afford it. I hope by now we have learned the 0% down fads are there to help us get into debt by getting things we can’t really afford.

In any case though, buying a house does involve taking a significant amount of debt on your head – we’re talking 6 figure debt. That is not something to take lightly. Especially for something that’s not a necessity when you can rent a nice apartment or even rent a nice house without all the burdens.

I was surprised to read in Ramsey’s book that he actually recommends buying a house on cash. I was shocked to hear this. Muslims are so busy trying to run loopholes around the shari’ah to finance houses with interest under another name, that no one is actually preaching the value of saving and buying on cash. It might take a while, sure, but what price can you put on that peace of mind? I know of many people who have purchased houses on cash, and I’m not just talking cheap houses either, but houses close to the half million dollar range. In the Millionaire Mind, they showed that many of the houses bought over a million dollars were actually bought on cash. It’s doable, but it takes some saving and persistence. If saving an amount like 50k or 100k or 150k sounds otherworldly, maybe its a sign that in reality buying a house is not something that you can truly afford to begin with. Besides, what’s wrong with renting a house, or a nice apartment?

One last note on houses. Many people justify buying a house due to the tax break you receive. I will quote something from Ramsey’s book regarding ‘Stupid Tax’:

If your mortgage payment is $900 and the interest portion is $830 [RofC if you are using “Islamic” Finance ;)], you will pay that year around $10,000 in interest. What a great tax deduction! Right? Otherwise, you’d pay $3,000 in taxes on that $10,000. But who in their right mind would choose to trade $10,000 for $3,000?

Student Loans

Again, let’s get the halal and haram of student loans out of the way. Here is the official answer. I can’t give any more than that on whether it is halal or haram. For more you would need to take it to an Imam and go over your specific situation. What I can offer here though insha’Allah, is some advice on the ‘taqwa before fatwa’ and a fiscal look at how the student loans work out.

Dave Ramsey has an excellent discussion on College funding in his book. The most striking quote to me was this zinger,

College degrees do not ensure jobs. College degrees certainly don’t ensure success. College degrees do not ensure wealth. College degrees only prove that someone has successfully passed a series of tests.

No matter how you look at it, at the end of the day, you only get out of your college education what you put into it. Before taking a loan (obviously in the case that you deem it to be permissible due to your situation), consider a few of the following points. Have you put research into what the most cost-efficient college or university to attend is?

Can you save money by going to community college for 2 years and then transferring somewhere else? If you take a loan, is it strictly for education, or is it also – as many people do – financing the college lifestyle of the apartment, food, car, and everything else? Are you going to a public university instead of a private one? Can you live at home and save extra money?

When I went to university, alhamdulillah I was fortunate enough that my parents were able to pay my tuition in cash. However, I should also add that in order for this to happen, I lived at home and commuted almost an hour each way every day. I opted for the local, public university instead of something out of town or a private university. I also worked to help cover some of the expenses. Before taking out a student loan, we should evaluate our situations. Can we work extra to save money for college? The majority of my classmates in college were actually full time employees with families that were going to school part time to complete their degree. Many others worked extra and took less classes per semester in order to pay for tuition. You may not graduate in 4 years flat, however, you can get an education without it being tainted by a student loan. Shaykh Muhammad alShareef had a conference call on finance for AlMaghrib last summer. In it, I remember him clearly telling people that if you cannot afford something like medical school, maybe you are not meant to be a doctor. I thought that was a bitter pill to swallow, but it is an important one. The education we get in college is what we use to seek out our jobs in order to support ourselves and our families. Are we willing to have the entire root of that tainted with ribaa?

Going to college in a manner described above is not only practical, but done by thousands upon thousands upon thousands of people every year. What occupation are you going into? Is the actual college you graduate from really that important? Many big corporations do not even require a degree as long as you have relevant work experience. In fact, it is often difficult to find people in the corporate world who are actually even working in their field of study, much less actually applying the education they got. In high school it seems like the college you go to is the end all be all deciding factor of your future so it is sometimes hard to look ahead. For most subjects though, it is not that big of a gap. Do you think the Calculus or History textbooks at your local community college are going to be that different from ones at MIT or Berkley? The education you receive more often that not is a result of exactly how much work you put into it irrelevant of where you are actually going.

Another option is to get a full time job with a company and then have them pay for your schooling. I know many people who were working full time and having their company sponsor even their Bachelor’s degrees, not to mention graduate degrees.

In Ramsey’s book he also mentions that many options of financial aid are often overlooked. If you take out the time to hunt down scholarships, you can get some, even small ones. I remember receiving a scholarship for almost half a semester’s tuition for simply writing an essay that took about 20-30 minutes. You have to seek it out. When there is a will, there is a way. Above all though, if you are serious about college and need help paying for it, make du’a to Allah (swt), and of course, before selecting any degree or college make Istikharah insha’Allah.

Insha’Allah this will conclude the debt series for now. I know I left out a big section on ‘wealth building’ and retirement/stocks, however, I have been unable to make any significant strides in researching those issues. Hope you enjoyed the series and I look forward to your comments :)

Omar Usman is a founding member of MuslimMatters and Qalam Institute. He teaches Islamic seminars across the US including Khateeb Workshop and Fiqh of Social Media. He has served in varying administrative capacities for multiple national and local Islamic organizations. You can follow his work at ibnabeeomar.com.

36 Comments

36 Comments

  1. Avatar

    Samir

    February 19, 2008 at 12:41 PM

    Jazakallahu Khair, being a student, that last section on student loans was a call to concrete action.

  2. Avatar

    Asim

    February 19, 2008 at 2:05 PM

    One thing that bothers me about Islamic House Finance Schemes: Even if such a scheme is in and of itself Halal (which, it seems after reading this article, is itself a metter of contention between different scholars/muftis), isn’t every financing company going to ask the buyer to purchase home-owner’s insurance for as long as they are not paid off?

    When we buy 3rd party car insurance, the fatwa (that I have seen) states that since the law of the land requires it, and it is a matter of compulsion, one may get the insurance, and would (Insha-Allah) be excused for it.

    What excuse, though, can be made for buying homeowner’s insurance when it is a private party (the financing company) that is requiring it, and there is no compulsion by the law of the land (“get insured or else you’ll land in jail”) to engage in this Haram transaction?

  3. Avatar

    Organic Muslimah

    February 19, 2008 at 3:27 PM

    Musa said, “I think you may be a bit too cavalier in dismissing the importance of a college education.”

    Thank you. Exactly what I was thinking.

    It seems that some Muslims like to make life harder for themselves. If every potential law or medical student threw the towel on the idea, how would our ummah be educated?

    Let’s remember the first verses of the Quran revealed to Prophet Muhammad (saw).

  4. Amad

    Amad

    February 19, 2008 at 3:53 PM

    Leases are perfectly halal… There is no interest in it. Its a purely rental contract, where a lease rate is used to calculate a profit. We may not see it, but all rental car company use their own research to calculate margin and ROI.

    There is no obligation to buy at end of lease. A price is known if you want to buy it and established in the contract. But it is not a sale until you decide to buy. I have never heard a scholar say that it is forbidden.

    As for the wisdom in buying new cars, that is a different issue. I agree its a ripoff in the sense you lose a lot on the initial depreciation. I never bought a new car (for 15 yrs since I started driving) until last year when I leased an environmental friendly :) prius. And I can tell you that the peace of mind that comes with new cars is pretty hard to beat, even if it may not be financially best. So I agree in principle with you but it does depend on your opportunity cost of time that you may waste in buying and maintaining a used car. My lifestyle is so busy that this is one hassle that I am glad I don’t currently have.

    W/s

    • Avatar

      Mushtaq

      December 16, 2015 at 3:24 PM

      In lease there is money factor, which is decided based on your Credit ratings. http://www.investopedia.com/terms/m/money-factor.asp . It is alternative way of charging interest. Also you will pay interest on the selling price of the vehicle even though you rented the vehicle only for 3 years.

  5. ibnabeeomar

    ibnabeeomar

    February 19, 2008 at 4:53 PM

    regarding college… :)

    i know the article came off a bit strong, but my intent is not to dismiss the notion of college. in fact, i actually think that imams and community leaders SHOULD have a college education of some sort :)

    here’s where im a bit cavalier though, is that i think people put too much stock in
    a) going to the best school for the best degree no matter what, and
    b) finishing college in 4 years, masters in 2…. etc.

    organic muslimah – i dont think people have to become doctors in order to be educated. when there’s a will there’s a way.

    definitely, we need educated folks, but not educated from haram sources. i have talked to medical students for example, who have told me it is not at all uncommon for people to go to school, take a year off to work and save money, then go back to school again and continue in this manner. i have met parents who worked 80 hours a week to save money to send their kids to school (a bit extreme if you ask me, but hey…)

    in the same way, i myself am inshallah looking at the prospect of doing a masters degree while working full time, taking advantage of my company’s tuition reimbursement policies.

    no one is saying dont be educated, all i’m saying here is make sure you have a plan of paying for it in a halal manner before embarking on the journey. can you go to med school, get a masters, phd, and all that on cash? yes. will you go to the US News top rated school and graduate in 4 years… maybe not. but i do venture to argue that those who might go to public university and may take 6 years to do their bachelor’s are not necessarily any less educated than the others.

  6. ibnabeeomar

    ibnabeeomar

    February 19, 2008 at 4:55 PM

    another option for college, or even house buying – get together with your family and extended relatives and see if they will give you a HALAL LOAN. masjids do it all the time when building projects come around, why cant you do it with your own family?

    my main beef is that i think people try to just assume the only option is a student loan and jump into the interest and debt without really evaluating other available avenues. i hope this will shed light on some of those other ways of making it work :)

  7. Avatar

    Organic Muslimah

    February 19, 2008 at 5:20 PM

    I am personally attending a public university and have avoided loans with interest thus far. I’ve used the community college route as well and have saved a lot of money. However, I know many friends who don’t have the option but to take loans out with interest. Remember, if you are a dependent, you are almost always ineligible for state and federal grants. And for some degrees, you are required to enroll with the university as a freshman.

    It’s not as simple as you put it. I believe, ya akhi, Islam is flexible. Your ideal picture makes it almost impossible to live in the West in a halal manner.

    A college degree isn’t a guarantee for a job, but it does open the doors to a career. Especially if you are going into a professional field as engineering, pharmacy, education,etc. As a matter of fact, having a bachelors is becoming worthless and most people have to work on some sort of graduate level degree to be recognized and receive a raise. This is true at least in my field of study.

    I don’t believe taking out a loan for education is haraam. I think our communities need professionals in EVERY field. I would like my physician to be Muslim, my lawyer to be Muslim, my congressman to be Muslim, my psychologist to be Muslim, my children’s teachers to be Muslim, my pharmacist to be Muslim, etc.

    And unfortunately, not everyone has rich family members who can chip in for their education. You state the ideal, but who can really afford it?

    I appreciate the research you put in your articles, but as much as this particular post is relevant to my life, I haven’t found it to be practical.

    • Avatar

      Riyaz

      April 27, 2011 at 3:23 AM

      ‘Your ideal picture makes it almost impossible to live in the West in a halal manner.’

      I have a problem with this kind of thinking. Why should the west be privileged to make exceptions to the Islamic way of life and the rest of the world be left behind. To speak the truth, it’s harder to be within the guidelines of the permissible in the ‘non-western’ world.

      Islam doesn’t work on exceptions.

      I know I was too strong but I may if required give pertinent explanations to what ever I said in detail.

      Jazak’Allah.

  8. ibnabeeomar

    ibnabeeomar

    February 19, 2008 at 5:29 PM

    organic muslimah – the question arises again though – can someone work full time and go to school part time to minimize the amount of the loan or possibly even knock it out altogether? there’s lots of people who are not financially well to do that make it work this way. all im saying is we shouldnt we too quick to just grant a pass to taking a student loan with interest if there’s other ways around it.

    and i agree.. it DOES make it difficult to live here in a halal manner. i truly believe that the financial situation we face here is one of THE BIGGEST tests that we face as muslims. who said it was supposed to be easy ;)

  9. ibnabeeomar

    ibnabeeomar

    February 19, 2008 at 5:56 PM

    amad – what if you do enough driving that you’d easily eclipse the mileage limit?

  10. Amad

    Amad

    February 19, 2008 at 6:15 PM

    The price specified for purchase is usually easily lower than market price so most people will buy and sell it, make some money, and not worry about mileage.

  11. Avatar

    Yus from the Nati

    February 19, 2008 at 8:02 PM

    Bismillah,

    I’m not understanding why there’s a “problem” with the co-ownership deals. I’ve looked at the chart as well and…yes…it IS exactly the same as the mortgage table.

    However, correct me if I’m wrong.

    The issue is, the loan (mortgage) vs. you investing and being a part of the “product (house)”

    When you take a loan from the bank, that’s exactly what it is…you OWE them that money right? meaning no matter what…it’s a “F-You, Pay-me (excuse my language)” situation. Meaning you can take ALL the loss…you don’t share a loss if there was one to be shared, or you don’t share a profit if there was one to be shared.

    In the co-ownership…if something happens and you can’t pay…you BOTH lose (according to the percentage both parties own?) or both GAIN if you sell the house (according to the percentage owned?).

    Basically what I’m saying is…isn’t the issue of WHO shares the perceived risk involved which makes it haraam (on top of the riba)?

    In mortage (you take all the risk)

    In co-ownership (you share the risk)

  12. Avatar

    theManOfFewWords.com

    February 20, 2008 at 12:58 AM

    Musa, yo man I hate to call you out but all that talk about college gave me a headache. Aside from a small pool of career choices college is a complete waste of time and money.

    I regret going and I also went to grad school where I was always at my professors throats because they were fools for the most part. Independent thinking? Ha! They were the most jaded and close-minded bunch. When you start challenging their intellectual assumptions things go all fourth grade and they either ignore you or start making fun of you.

    Also, Islamicization of knowledge is one of those meaningless modern contrivances. i have an article in the works about that, stay tuned to my blog inshallah it will be up sooner or later.

    But man no more of that go to college stuff. It’s not an education its a ritual. People would be better off taking the money and the potential earnings from working instead of going to school and invest it, try and start a business or use it to study Arabic and memorize the Quran overseas. All worthy exercises unlike listening to some blowhard professor prattle along about some inane theory and then give you an assignment on the philosophical evolution of dissonant harmonic flatulent poetry theory amongst the pre-industrial indigenous Maori and how this relates to the occurrence of pedophile, republican islamophobes from Oregon’s hinterland.

    I can see how this will be valuable for the “islamicization” of knowledge whatever that means.

  13. Avatar

    aarij

    February 20, 2008 at 12:59 AM

    Another excellent article on an issue that is really important for Muslims here in N/A. My take on University/Colleges:

    The education is extremely important. NO doubt about it. And the name is important too (for prestige and jobs). So let’s not write this off. I remember when I was in high school, the prestige of the Univ. meant a lot to me.

    The issue is: how can we go to a big name Univ. while not taking haram loans?

    1. Co-op/Internship. Some universities have internships starting at 2nd or 3rd year. My university had a co-op program that gave me 2 years of work experience interspersed throughout my schooling. This gave me the money to pay tuition and not need debt. So when applying, keep this in mind.

    2. Studying something useful. Don’t study French or German or “General Arts” or something (unless you have a plan to translate the Qur’an into French or something). Study something that will get you a job in the summer and right after graduation. It’s a tough thing to say, but it’s a reality.

    3. Save up before University. Get 2 jobs in the summer before University or during high school (if possible). And save each penny. Buy cheap Filos instead of the expensive Nikes…etc.

    4. Take a year off. One of my friends did this, and another one is planning to do so. This is one of the best options. You can take a year off to work and pay off your tuition. And in this one year, you can even do something as awesome as complete your hifdh. This is one of the best options…don’t overlook this.

    5. Make a list of rich uncles and aunties. Ask them to loan you money without riba. Tell them that you have a plan to pay off the money in x years time (goes without saying, you should have a plan in mind). Some brothers have managed to get massive loans this way, alhamdulillah. This is one of the best sources of halal loans.

  14. Avatar

    Fatma

    February 20, 2008 at 2:34 AM

    Assalaamu alaykum,
    Jazakallah khayr brother for the articles. They were of immense benefit.
    I was wondering if you came a cross anything on education savings plans as you were researching for this series. What I mean by this is that, in Canada for example, the government gives people certain incentives to save for their kids education. This requires that you have a Registered Education Savings Plan(RESP) at a financial institution and depending on your income, they’ll give you 40, 30 or 20 cents for every dollar you save in a given calender year. The problem though, is that there is Riba involved as the only way to get that money from the government is to go through the RESP route. I’ve heard of instances where some scholars have said that you can ge the RESP account in order to get the money from the governement but not take the interest that accrues. Is there any merit to this? Have you seen anything on this topic in your research?
    Jazakallah khayr.

    • Avatar

      Jr23

      February 16, 2012 at 5:12 PM

        There are some investment companies in Canada that will allow you to open an RESP account without interest accruing on the balance. You just have to ask.

  15. Avatar

    zfnd

    February 20, 2008 at 2:35 AM

    ibnabeeomar,

    jazakallahkhair for your research and easy-to-digest presentation, great stuff.

    well….almost all of it was ‘easy to digest’ :)

  16. ibnabeeomar

    ibnabeeomar

    February 20, 2008 at 10:46 AM

    fatma -wsalam.. unfortunately i didnt get to dig that deep into it. im struggling with the ESA stuff here myself :)

  17. Avatar

    Ammar

    February 20, 2008 at 11:48 AM

    I agree with you on Dave Ramsey. His show comes on here in Toledo on AM 1560 at 3pm.
    I try to listen to him anytime I am in the car and its on.
    While he seems to be Christian preacher, his advice is very Islamic, especially staying out of debt.

    On student Loans. Some schools, like my Law School, don’t allow a student to work more than 10hrs/week in freshman year. I think that is a nationwide law school requirement.
    It will be very difficult to finance law school working 10 hrs/week. I agree on going to state schools and living at home.
    But when it comes to professional and doctorate programs, I think taking loans is the only viable option. Unless you have some rich friends who can give you $15,000/year or more.
    Two other points, Professional schools, even state schools, cost at least $15,000 year.
    Second, there is no financial aid or grants (Free money) for professional schools.

    ~Ammar

  18. ibnabeeomar

    ibnabeeomar

    February 20, 2008 at 12:48 PM

    http://islamqa.com/index.php?ref=101903&ln=eng

    a good fatwa on when buying a house constitutes extravagance.

  19. Avatar

    theManOfFewWords

    February 20, 2008 at 12:49 PM

    Musa, man I phrased my response deliberately hoping to pick a fight and you have to all go and agree with me.

    At least you reminded me to also criticize the pedantry and obnoxious elitism inherent in “academic” language.

    By the way Aarij, prestige via University Indoctrination is (for the most part) an illusion and the piece of paper that you get doesnt get you any jobs, it makes you a slave.

    I could go on but I’m not in the mood.

  20. Avatar

    H.Ahmed

    February 20, 2008 at 2:55 PM

    Asalaamualaykum wr wb

    Jazakallah khair for the great advice. Its all about living within ones means, and not transgressing.

    Great advice about cars, homes, etc. Do we really need to buy multimillion dollar homes? Do we really need luxury cars? Not only will it help our money management, but also our nafs’ management.

    Alhamdulillah I am very blessed to be fortunate enough to have parents that are able to pay for my schooling (I went to a state school for undergrad, and am currently in a state school for med school).

    Unfortunately, many students feel that they have the right to attend the best private schools, and to live ‘like the professionals they aspire to become’ while they are still in school (many classmates of mine are easily taking 40+k/year loans).

    Not only will a sacrifice in school name now save us the worry of loans in the future, but refraining from loans and trying to stay shariah compliant will also put more barakah in our studies.

    However, at the same time it is a reality that there are many who cannot even afford state schools/ community colleges – even with part time jobs, taking time off to work, – or for whatever reason. It is important not to be judgemental or critical of those who have to take loans for school – as dispensations can be made in our deen – as was alluded to earlier in this article. Only Allah knows best.

    Also, all this anti-university rhetoric isnt very practical in today’s day and age. It is true that the whole concept of 4 year universities in todays day and age has become a huge multi-billion dollar business and its actual practical value in terms of knowledge from classes in the real world work is debatable for most majors. Nonetheless, it is hard to be taken seriously in this society without that “piece of paper”, especially in todays world where our country is headed in towards a recession and well-paying jobs are already become scarcer .

    Lets all keep each other in our duas

  21. Pingback: Some Thoughts on Islamic Finance and the Mortgage Crisis | MuslimMatters.org

  22. Pingback: Pay Off Your Debt - Khutbah by Muhammad Faqih | MuslimMatters.org

  23. Avatar

    Yusuf-Rasheed Reed

    June 7, 2008 at 11:56 PM

    Wow! What an eye opener. Al Hamdulilah I found this series. I am seriously playing with fire. Insha’Allah I will take all this in and get out of debt. Jazak Allah Khair for this series. I am really ashamed at how I have been living. I should know better.

  24. Avatar

    LH

    June 17, 2008 at 1:36 AM

    Assalamu Alaykum,
    I really like this series. As far as student loans, I had taken them for undergrad, however, I wasn’t a practicing Muslim then and by the time I realized taking riba-based loans was haraam, I was out of college and repaid the full loans as soon as I could. I went to a public university, lived with my parents, and worked part-time while in college. My only regret is that I should have gone to the local community college in my town for the first two years. My sister also went to the same school as me and I tried as soon as I could to pay off her school loan as well. Alhumdulillah, we have not college loan debt. But I can’t say the same for a lot of the Muslim brothers and sisters I know. Also, on another note, I had changed my major when I became a junior and graduated a year later, however my last year I was not eligible for a loan and had to pay for the last year of school (which turned out to be better for me). A lot of students going into college don’t know what major to take or they change it a few times while in school. This also can cost a lot of money in taking summer classes and/or graduating late and taking more classes. I think we should have more career counseling in high school and the first two years of college to help students make wise decisions in pursuing a major. Both my sister and I changed our majors. Thankfully, my sister changed her major at the end of her freshman year but she still graduated a semester late.

    I just hope a lot of students read this series so they can examine their situation and make decisions on how to stay away from riba and still aim to get a college education.

    Walikum Assalam

  25. Avatar

    Maria

    July 4, 2008 at 2:35 AM

    Dear Author or anybody who is knowledgeable,

    Assalamu ‘alaykum!

    I have one question regarding acquiring a house without riba. As I searched on the internet, I learned that some scholars allowed acquiring a house through conventional mortgage based on neccessity – – a fatwa based on Abu Hanifah. While there are also some scholars who differ it.

    Since there are differences of opinions, I would better rent until I have enough cash. But when? A question that I don’t know the answer since I ‘m just a stay at home mum. Only Allah (s.wt.) knows.

    Now, my question is:

    Do I have part of riba if I own a house through my brother who originally did it with bank mortgage?

    What happened is this: my brother bought a house through bank mortgage. He is still paying the monthly payment for that mortgage until now and he wants me to share the monthly payment to 50 – 50 so that he can keep the house. Otherwise, he will sell the house because he can no longer afford to pay its monthly repayments.

    If I’ll agree to share, do I have part of riba transaction?

    If I’ll agree to share, is it not buying a house in installment without morgage? It’s him who did the mortgage, not me. I’ll pay my monthly share to him, not to the bank.

    Thanks a lot for your guidance and help.

    Maria

  26. Pingback: The Financial Meltdown and its Underpinnings of Debt | MuslimMatters.org

  27. Avatar

    Abu Zainab

    November 17, 2008 at 2:01 AM

    There are several good observations made in this series. The best suggestions:live within your means, pay cash, and avoid ribaa like the plague. Living without credit and without ribaa (and reaching the debt-free level) is hard in Western countries, as one sister pointed out. It is also completely possible.

    One major obstacle to tackling the debt issue was mentioned: the desire for immediate gratification. The American culture revolves around this. Muslim Americans are just as affected by it as everyone else.

    A major obstacle may also be the weakness of an individual to resist family and societal pressure. Muslim families are as prone to materialism as other Americans. It can be hard to tell your parents you want to “work-as-you-go” through med school. Or to resist the pressure to buy a $300,000+ house on mortgage when all the other Pakistanis/ Bengalis/ Palestinians/ (insert ethnic origin) have one. What would they say if they knew you rented ? A family I know rented an apartment for almost twenty years and then bought a dream home in suburbia…cash! So it can be done.

    I love this blog. I also usually skip the comments because they are loaded with “I think” and “in my opinion.” These are dangerous and irresponsible phrases. The nature of the topic begs a reminder for Muslims to research the “halal / haraam” issue before they begin any endeavor, financial or other.

    For Sr. Maria and others who posted questions that are essentially asking for fatawaa, Islam QA is a reliable resource. Search results for loans, ribaa, mortgages, student loans, etc. Their writing style is adapted for the student of knowledge. QA presents all sides of the argument, including the “differences of opinion”; they consider the evidence in light of the Qur’an and Sunnah; they are flexible and moderate within the framework of Islam; and the shuyookh that research the topics are aware of current events and lifestyles in Western countries.

    Thanks for the series. I enjoyed it a lot. May Allaah continue to bless your efforts. Ameen.

  28. Avatar

    Abdullah

    December 3, 2008 at 3:02 PM

    I also wrote a piece on $30,000 not a penny of interest.. It explains how I managed to avoid paying interest on a huge student loan for my university expenses.

  29. Avatar

    Mr Thomas

    September 23, 2010 at 4:05 AM

    How mch?

  30. Avatar

    ZAI

    April 27, 2011 at 2:02 AM

    I think Shaykh al-Shareef’s saying that if one cannot afford to become a doctor maybe they weren’t meant to be is atrocious advice. With all due respect to him…I totally disagree with that line of thinking. It’s pretty much a way of saying if you were born rich than great, everybody else is outta luck. Over time a lack of upward social mobility creates huge disparities in society and we would be stuck with a type of Islamic caste system. This is already visible in many Muslim nations like Pakistan, Afghanistan, Egypt and many others where a rich upperclass is like an educated elite living in bubbles financed by the luck of generational wealth in land, and most of the masses are peasants who never had and continue not to have any prospect for bettering their situation in life.

    Nodoubt Islam teaches a belief in the Qadr…especially with things that we cannot change or affect, but nowhere in Islam do I see a demand to submit and resign oneself to a Qadr that we HAVE the power to change if opporunity presents itself. Taking qadr to an extreme would be a form of fatalism that stagnates and retards the ummah. What’s the point of even being on this Earth and tested if we make no effort at anything?

    A better course would be to offer constructive halaal approaches that help Muslim people regardless of where they fare in the genetic lottery. For instance, the US government offers programs to help finance non-loan grants and even forgive debt if new doctors agree to allot a certain amount of time to practicing medicine in rural or very underserved areas. Aside from taking advantage of such a program, why can’t we Muslims start something akin to that? Why can’t we have a non-profit chain of Muslim health clinics that agrees to finance a students educations if they agree to serve 5-10 years or more at the place after graduating?

    That’s just one example. We need to start thinking out of the box and coming up with halaal solutions that balance deen with duniya. These fatalistic pronouncements are a non-starter, especially because they assume an ideal that doesn’t exist in the Muslim ummah…

    Sorry, but education effects a lot of things. It affects who you marry or if you can even get married, it affects in turn what you can or cannot provide your children,what kind of neighborhood environment(safe/unsafe) you live in, and on and on.

    It’s easy to tell someone not to get a loan to get educated. Are those same idealists gonna then gonna give their daughters hand in marriage to the uneducated guy or the doctor? Are the uneducated guys gonna sit on the masjid board or are the doctors and engineers sahibs? Real easy to make these prnouncements as if we’re living in an ideal world.

    The day Muslims get over classism, being obsessed with status, money, etc. tell our youth not to take a loan for education. Until that day, better to come up with halaal alternatives. All due respect to Imam al-shareef, but I TOTALLY disagree with that type of thinking. My advice to the Muslim brothers and sisters: try your hardest not to take loans, work towards providing alternatives for future generations and be modest in balancing duniya and deen…but TAKE the loan if you sincerely have no other choice and God is a forgiving God and knows whats in your heart. Until our entire COMMUNITY changes its priorities, it’s totally irresponsible only to tell a few people to and doom them to a life of difficulties in everything from marriage to community…Ali

  31. Avatar

    Tabish (@tabishfayyaz)

    October 13, 2013 at 1:07 AM

    Assalam u Alaykum,

    I have read parts of your wonderful article series from time to time. Please consider creating a pdf ebook of the whole series and sharing that here or through your other websites. Perhaps an infographic would be beneficial too. islamographics dot com might show interest in creating the infographic

    Perhaps you already know if not then check out Halal Money Guide pdf by 1st ethical.

    jazakAllah khayr

  32. Avatar

    Asif Iqbal

    December 12, 2013 at 7:30 PM

    Assalamu Alaikum

    Great series on money management. I understand and agree with your statement about not buying something that we cannot afford. My question to you is, do you recommend this rule for buying a home as well?

    Because, one of the worry with renting is, the longer you wait, the higher the price of houses go (in general). What is your advice in regards to buying, of course using an Islamic finance?

    If you are against buying with loan, please advice how we should invest our savings wisely because just keeping it in the bank is not an option as we do not want interest money.

    Jazakumullahu Khairan.

  33. Avatar

    Azeezat

    June 30, 2016 at 5:37 AM

    as salaam alaykum.

    Th link for the official response regarding student loans is not working.

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#Life

Highly Educated, Willingly Domesticated

Laura El Alam

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Doctor.  Engineer.  Certified Nurse-Midwife. Writer and Literary Critic.  Lab Technician. Parliamentary Assistant. These highly-trained, respected careers are the culmination of years of intense study, training, and self-discipline.  Most people, upon achieving these esteemed positions, would happily dedicate the rest of their working years to putting their knowledge and expertise to use. They would gradually gain more experience, earn greater pay, and amass professional perks.  Most likely they would also, over time, assume leadership roles, earn awards, or become sought-after experts in their field.

What kind of person has all this at her fingertips, but decides to give it up?  Who would trade in years of grueling study and professional striving for an undervalued position that requires no degree whatsoever What type of professional would be willing to forgo a significant salary to instead work for free, indefinitely, with no chance whatsoever of a paycheck, recognition, benefits, or promotion?  

Who else, but a mother?  

While certainly not all mothers choose to give up their careers in order to raise their children, there is a subset of women who do. Stay-at-home-moms (SAHMs) may spend the majority of their days performing unglamorous tasks like washing dishes, changing diapers, and reading storybooks to squirming toddlers, but behind the humble job title are dynamic, educated, and capable women. They may currently have a burp cloth in one hand and a sippy cup in the other, but chances are, SAHMs have a mind and capabilities that reach far beyond the apparent scope of their household duties.  

What motivates a capable and ambitious woman to give up her career and stay home to raise children? Is she coerced into it, or does she choose it willingly? What is her driving force, if not money, status, or respect?  I had many questions for these women -my sisters in Islam and my stay-at-home “colleagues”- and some of their answers surprised me.  

For this article I interviewed seven highly-educated Muslim moms who chose to put successful careers on hold, at least temporarily, to raise their children. Between them, they hold PhDs, MDs, and Masters degrees. While the pervasive stereotype about Muslim women is that they are oppressed and backward, these high-achieving females are no anomaly. In fact, according to her article in USA Today, Dalia Mogahed points out that, “Muslim American women are among the most educated faith group in the country and outpace their male counterparts in higher education.”  Across the pond, The Guardian reports that more young Muslim women have been gaining degrees at British universities than Muslim men, even though they have been underrepresented for decades.”    

 

Ambitions and dreams

Every single one of the women I interviewed grew up in a household with parents who highly emphasized their daughters’ education. In fact, all of them were encouraged -either gently or more insistently- to pursue “top” careers in medicine, engineering, or science. Perhaps unsurprisingly, most of the women I interviewed were at the head of their classes at university.

In their school years, before marriage, all of the women I spoke with considered their career to be their main priority; motherhood seemed far-off and undefined. “When in uni,” explains Neveen, an endodontist who eventually put her career on hold to be a SAHM and homeschooler, “I never, ever thought I’d homeschool (nor did I believe in it), nor did I ever think I’d be a SAHM. I was very career-oriented. I was top of my class in dental school and in residency.”

“I absolutely thought I would be a career woman,” agrees Nicole, a mom of three in California who holds a Masters degree in Middle East Studies. “I never considered staying at home with the kids, because they were totally out of my mind frame at the time.”

“I expected that after graduation I would follow a research-based career,” adds Layla*, another SAHM in California who holds a PhD in Computer Engineering. “I never thought I’d stay at home because I believed it was fine for kids to be in daycare. I also thought SAHMs were losing their potential and missing out on so much they could otherwise accomplish in their lives.”

As young women, many assumed that if they ever chose to start a family, they would have assistants, nannies, or domestic helpers to lighten their load. Several of them believed they would put their future children, if any, in daycare. However, the reality of motherhood made each of these women change her mind.  

“My child was highly attached to me,” explains Sazida, an Assistant to a Member of Parliament in England, “and I could not envision him being looked after by anyone else despite generous offers from relatives.”  

“After I had my first child all I wanted to do was be able to care for her myself,” concurs Melissa, a Certified Nurse Midwife from New York.  

 

Other Motivations

It turns out that maternal instincts were not the only factor that made women choose to drop out of the workforce. Dedication to Islam played an enormous part in their decision-making.

“After having my first child,” explains Layla, “I decided that he was far more precious than working. He is a gift that Allah subḥānahu wa ta'āla (glorified and exalted be He) gave me to protect and care for.”

“After I became Muslim,” shares Nicole, “My goals changed, and I hoped to marry and have children. I do think it was beneficial for my children to have a parent always there to depend on,” she adds. “I feel like I was the anchor in the family for them, and I hope to continue that role.”

“What’s important to me,” asserts Neveen, “Is to raise my kids as good Muslims who love -and are proud of- their life and deen.”

Another reason many highly educated women choose to stay at home is because they have the opportunity to homeschool some or all of their children.  Remarkably, out of the seven women who answered questions for this article, five reported that they chose to homeschool at least one child for a few or more years.  

“I really enjoy my homeschooling journey with my kids and I get to know them better, alhamdullilah,” states Layla.

The opportunity to nurture, educate, and raise their children with love and Islamic values is the primary reason why these talented women were willing to put their successful careers on hold. “Hopefully Allah subḥānahu wa ta'āla (glorified and exalted be He) will reward us in Jannah,” muses Layla.

 

Challenges

Although none of the women I interviewed regrets her choice to be a SAHM, they all agree that it is a challenging job that is actually harder than their former career.  

One obstacle they must overcome is the negative perception others have about successful women who make the choice to put their career on hold.  “I soon learnt that casual clothes, a toddler, and a buggy don’t give you the same respect as suits and heels,” says Sazida.

One would expect, given their faith’s emphasis on the dignity of mothers, that Muslim SAHMs would enjoy the support of their family and friends.  Unfortunately, this is not always the case.

One mom explains, “My in-laws offered to look after my child, and my father-in-law couldn’t understand why I wanted to stay at home when there was perfectly good childcare that they were offering. After two and three years passed, he got more and more disheartened that I was not earning and complained about the lost potential income.”

“My non-Muslim mother told me that I wasting my education,” confides Nicole. “She did not support me staying home, though I think she appreciated that I was there for my children and have a good relationship with them.  She was a SAHM as well, so I am not sure where that was coming from, actually.”

Melissa’s mom was similarly skeptical of her daughter’s decision. “My mother didn’t love me being fully dependent on my husband,” she admits.  

“I was not at all supported by my family or friends,” laments Radhia, a Lab Technician with a BS in Microbiology with a Chemistry minor.

Other than being doubted and blamed for their choice, there are other challenges that SAHMs face. Accustomed to mental stimulation, exciting challenges, professional accomplishments, and adult interaction, many former career women find staying at home to raise youngsters to be monotonous and lonely. The nannies, assistants, cleaners, and other workers they had envisioned often never materialized, since hiring these helpers was usually too expensive. Husbands who spent the day working as the family’s sole breadwinner, were usually too tired to help with household duties.  A few women admitted that they felt guilty asking for help in the home when their husband was already exhausted from work. To exacerbate the problem, most of the women I interviewed lived far from family, so they could not rely on the help one normally gets from parents and siblings. That means the bulk of the childcare and housework fell onto their laps alone.  

“The main challenges for me,” states Nicole, “were boredom, and finding good friends to spend time with who had similar interests. I was also very stressed because the raising of the children, the housework, the food, and overall upkeep of our lives were my responsibility, and I found that to be a heavy burden.”

“I think the feelings of vulnerability and insecurity about whether I was a good enough mother and housewife was difficult,” shares Melissa. “All my sense of worth was wrapped up in the kids and home, and if something went wrong I felt like a failure.”

“It was not as easy as I thought it would be,” confesses Radhia. “It was overwhelming at times, and I did miss working. Emotionally and physically, it was very draining.”

“Staying home has been harder than I expected,” adds Summer*, a Writer and Literary Critic from Boston. “I didn’t realize how willful children could be. I thought they’d just do what I said. I’m still trying to get used to the individuality! It’s harder than my job was, only because of the emotional load, and the fact that the effort you put in doesn’t guarantee the results you hope for.”

 

Money Matters

Giving up their salary also put women in a state of financial dependency, which can be a bitter pill to swallow for women who are used to having their own resources.  

“I felt very dependent on my husband, financially,” says Radhia.

“Alhamdulillah, my husband does not refuse if I ask him to buy anything,” explains Layla. “However, I felt like I was losing my power of deciding to buy something for someone else. For example, if I want to buy a gift for my mother or my sister, he never refuses when I ask him, but still I feel internally it is harder for me.”

“Alhamdulillah my husband’s personality is not one that would control my financial decisions/spending,” shares Neveen. “Otherwise I would never have chosen to be a SAHM.”

“Giving up my career limited my power to make financial decisions,” asserts Summer. “I could still spend what I wanted, but I had to ask permission, because my husband knew when ‘we’ were getting paid, and how much. He paid the bills, which I didn’t even look at.”

“Asking permission,” Summer adds, “is very annoying.”

Re-entering the workforce was difficult for some women, while not for others.  The total time spent at home generally affected whether women could easily jump back into their profession, or not.  Some of the moms felt their skills had not gotten rusty at all during their hiatus at home, while others felt it was nearly impossible to make up, professionally, for missed time.  

 

Words of Wisdom

Although all of the women I interviewed firmly believe that their time at home with their children is well-spent, they do have advice for their sisters who are currently SAHMs, or considering the position.  

“If I could go back and speak to myself as a new mum, I would tell myself to chill the heck out and just enjoy being a new mum,” says Sazida.

Melissa offers, “I wish people understood how talented you have to be to run a home successfully. It’s a ton of work and it requires you to be able to do everything from snuggle and nurture, to manage the money, budget, plan precisely, be a good hostess, handle problems around the home, manage time, and meet goals all while trying to look cute.

“I would always recommend that women have their own bank account and money on the side,” advises Nicole. “You never know when you are going to need it.”

“Once their kids are in school,” adds Radhia, “I would suggest SAHMs start something from home, or take on part time work, or courses, if necessary.”

“For moms choosing to stay at home,” Layla suggests, “I would say try to work part-time if your time permits, and if you have a passion for working. Trust that Allah subḥānahu wa ta'āla (glorified and exalted be He) will protect you, no matter what. Remember, you are investing in your kids, and that is far more important than thinking ‘I need to keep money in my pocket.’”

 

Support, don’t judge

As a Muslim ummah, our job is to support one another as brothers and sisters.  It seems people forget this oftentimes, and erroneously believe that we are entitled to gossip, speculate, and sit in judgement of each other, instead.  In our lives we will all undoubtedly encounter women who choose to continue their careers, and those who put them on hold, and those who decide to give them up completely. Before we dare draw conclusions about anyone, we must keep in mind that only Allah subḥānahu wa ta'āla (glorified and exalted be He) knows a person’s entire story, her motivations, and her intentions. Only He subḥānahu wa ta'āla (glorified and exalted be He) is allowed to judge.  

We must also remember that some women, for a variety of reasons, do not have the luxury of choosing to stay at home. They must work to the pay the bills. Allah subḥānahu wa ta'āla (glorified and exalted be He) knows their intentions and will reward their sacrifices as well.

 

It is my hope that this article will not cause more division amongst us, but rather raise awareness of the beautiful sacrifices that many talented and intelligent women willingly make for the sake of their children, and even more so, for the sake of Allah subḥānahu wa ta'āla (glorified and exalted be He).  They are the unsung heroes of our ummah, performing an undervalued job that is actually of utmost importance to the future of the world.

 

*Name has been changed

 

 

For the past decade, writer Laura El Alam has been a regular contributor to SISTERS Magazine, Al Jumuah, and About Islam. Her articles frequently tackle issues like Muslim American identity, women’s rights in Islam, support of converts/reverts, and racism. A graduate of Grinnell College, she currently lives in Massachusetts with her husband and five children. Laura recently started a Facebook page, The Common Sense Convert, to support Muslim women, particularly those who are new to the deen.

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#Life

OpEd: Breaking Leases Into Pieces

Abu Awad

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Ali ibn Talib raḍyAllāhu 'anhu (may Allāh be pleased with him)once said, “Know the truth and you’ll know who’s speaking the truth.” 

I am based in Canada and was recently having coffee with friends. In the course of the conversation, a friend (who I consider knowledgeable) said that it’s okay to pay interest on a leased car because interest doesn’t apply to lease contracts. This completely caught me off guard, because it made no logical sense that interest would become halal based solely on the nature of the contract.

I asked him how this can be true and his response was that the lease contract is signed with the dealer and the interest transaction is between the dealer and the financing company so it has nothing to do with the buyer. Again, this baffled me because I regularly lease cars and this is an incorrect statement: The lease agreement is signed with a third party financing company who is charging you directly for the interest they pay the car dealership. Therefore, any lease contract that has interest associated with it is haram. This is the same as saying your landlord can charge you interest for his mortgage on a rental contract and this would make it halal. I tried to argue this case and explain to my friend that what he was saying was found on false assumptions and one should seriously look into this matter before treating riba in such a light manner.

Upon going home that night, I pulled out all my lease contracts (negotiated to 0% mind you) and sent them over to my friend. They clearly showed that a bill of sale is signed with the dealer, which is an initial commitment to purchase but the actual lease agreement is signed with a third party financing company which is charging you interest directly. If this interest rate is anything above zero it is haram (anything which is haram in a large quantity is also haram in a small quantity).

To my dismay, instead of acknowledging his mistake, my friend played the “Fatwa Card” and sent me a fatwa from a very large fatwa body in North America, which was also basing their argument on this false assumption. Fortunately for me, my friend pointed out the hotline number and the day and time the mufti who gave the fatwa would be available to answer questions.

I got in touch with the scholar and over a series of text messages proceeded to explain to him that his fatwa was based on a wrong assumption and for this reason people would be misled into leasing cars on interest and signing agreements with financing companies which are haram.
He was nice enough to hear my arguments, but still insisted that “maybe things were different in Canada.” Again this disappointed me because giving fatwa is a big responsibility – by saying “maybe” he was implying that full research has not been done and a blanket fatwa has been given for all of North America.

It also meant that if my point was true (for both Canada and the United States) dozens of Muslims maybe engaging in riba due to this fatwa.

The next week I proceeded to call two large dealerships (Honda and Toyota) in the very city where the Fatwa body is registered in the US and asked them about paperwork related to leasing. They both confirmed that when leasing a new vehicle, the lease contract is signed with a third party financing company which has the lien on the vehicle and the dealer is acting on the financing company’s behalf.

It is only when a vehicle is purchased in cash that a contract is signed with the dealer. This proved my point that both in the US and Canada car lease contracts are signed with the financing company and the interest obligations are directly with the consumer, therefore if the interest rate is anything above 0% it is haram. I sent a final text to the mufti and my friend sharing what I had found and letting him know that it was now between them and Allah.

1. As we will stand in front of Allah alone on Yaum al Qiyamah, in many ways we also stand alone in dunya. You would think that world renowned scholars and an entire institution would be basing their fatwas on fact-checked assumptions but this is not the case. You would also think that friends who you deem knowledgable and you trust would also use logic and critical thinking, but many times judgment is clouded for reasons unbeknownst to us. We must not take things at face value. We must do our research and get to the bottom of the truth. Allah subḥānahu wa ta'āla (glorified and exalted be He) says to stand up for truth and justice even if it be against our ourselves; although it is difficult to do so in front of friends and scholars who you respect, it is the only way.

2. There are too many discussions, debates and arguments that never reach closure or get resolved. It is important to follow up with each other on proofs and facts to bring things to closure, otherwise our deen will slowly be reduced to a swath of grey areas. Alhamdulillah, I now know enough about this subject to provide a 360 degree view and can share this with others. It is critical to bring these discussions to a close whether the result is for you or against you.

3. Many times we have a very pessimistic and half hearted view towards access to information. When I was calling the dealerships from Canada in the US,  part of me said: Why would these guys give me the information? But if you say Bismillah and have your intentions in the right place Allah makes the path easy. One of the sales managers said “I can see you’re calling from Toronto, are you sure you have the right place?” I replied, “I need the information and if you can’t give it to me I don’t mind hanging up.” He was nice enough to provide me with the detailed process and paperwork that goes into leasing a car.

Finally, I haven’t mentioned any names in this opinion and I want to make clear that I am not doubting the intentions of those who I spoke to; I still respect and admire them greatly in their other works. We have to be able to separate individual cases and actions from the overall person.

May Allah subḥānahu wa ta'āla (glorified and exalted be He) guide us to the truth and rid of us any weaknesses or arrogance during the process.

Aameen.

Ed’s Note: The writer is not a religious scholar and is offering his opinion based on his research on leasing contracts in North America.

Suggested reading:

Muslim’s Guide to Debt and Money Management Part 6

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