My bank credits interest in my account which I do not utilize for my personal expenses and give this money to poor people. However, I utilize some of this amount against bank charges on my home taken on lease. Is it allowed in Islam?
Assalam o alaikum wa Rahmatullah
I am very happy to know that you do not use interest income. May Allah grant you consistency in this practice! You should continue giving interest to poor people. The intention should not be that of charity as it is allowed only from the legitimate income. Your intention should be to return the money to those who are its real owners but the unjust monetary system takes it from them by employing the tactics of a capitalistic economy.
Utilization of interest income against unavoidable interest expense is an Ijtihadi issue and several scholars have allowed it. In my opinion, in case of real estate financing, the amount you pay in excess is not usury but it is rent in its essence. In Accounting, we have a concept of substance (essence) and form (apparent condition). Although such amount is called interest in form, but in substance, it is rent. For example, if you do not go for buying an apartment on lease, you’ll have to save money for a long period of time to buy the home. Meanwhile, you’ll have to pay rent for the same period because you have to live somewhere. Modern leasing has combined these two payments in one transaction. So in substance, it is rent and not interest. Therefore, you should not utilize interest income against this amount because it will be like paying rent from the interest income.
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