Things to Watch Out For
- Additional payments due to the passage of time
- Late fees that function as riba
- Over-reliance on consumptive debt
B. Financial System
Guide 06: Debt and Credit Without Riba
Debt is permissible in Islam, but it must not generate profit based on time.
Execution Checklist
- Avoid installments for lifestyle expenses
- Prioritize paying off interest-bearing debt
- Use Sharia financing based on real underlying contracts
- Set a maximum limit for your monthly debt-to-income ratio
Andi bought a gadget through a paylater scheme and ended up paying much more. He closed the paylater facility and switched to purposeful saving instead.
- The prohibition of riba in lending and borrowing
- The principle of justice in Sharia financing