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Fatwa CenterUsing interest money to pay off loan interests
Question
I have an educational loan which I pay 4% interest on. I cannot pay the whole amount right now in one shot. I am planning to pay it off in one year Inshaa Allaah. I am gaining interest of 3% on my bank's savings account (the amount of my savings currently cannot repay the educational loan debt). Can I use the interest I gain from savings account to cancel out the interest (only the interest) I pay on the educational loan debt?
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.
Interests are forbidden and it is not permissible for the beneficiary to own them, but he is obliged to spend them in charitable fields. Therefore, it is not permissible for you to use the interests you obtained in order to pay off the interests due to the loan you had from the bank.
You are now obliged as much as possible to get rid of the interests that are due because of the loan, by rushing to pay it off, if by paying this loan which you got with interest before the dead line exempts you from paying interest thereof. Since you are able to pay some of the loan, then you are obliged to take the initiative to do so in order to avoid a greater sum of interest. There is a rule which says that if it is not possible to fulfil the whole objective, it does not exempt a person from fulfilling a part of it.
So, you are obliged to repent to Allaah for getting a loan with interest, and for saving your money in banks which deal with Ribaa (interest and usury) without a necessity, by regretting what you did and being determined not to return to it again.
Allaah Knows best.
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