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:
- Lectures by Sh. Ghassan Barqawi
- 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 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.
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?
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 :)
Highly Educated, Willingly Domesticated
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.
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 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 will reward us in Jannah,” muses Layla.
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.”
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 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 knows a person’s entire story, her motivations, and her intentions. Only 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 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 . 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.
OpEd: Breaking Leases Into Pieces
Ali ibn Talib 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 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 guide us to the truth and rid of us any weaknesses or arrogance during the process.
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.
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