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Say I have $100,000 cash and a house worth $100,000. I loan Sam the $100,000 cash for 10% of 100,000 ($1000) interest each month. Also, I rent out my house to Kate for $1000 rent per month.

If Sam fails to pay me the monthly amount, the amount he owes me will increase the next month. Similarly, if Kate fails to pay me the monthly amount, the amount she owes me will increase the next month.

As the value of my house increases, I can increase the rent (by a certain % depending on the rent rates in the area). I can also increase the % of interest on my loan to Sam.

If both of them consistently fail to pay the monthly amount, I have the right to take my house back from Kate and my cash from Sam.

Say Sam lost the money and he is unable to payback immediately, then he is entitled to a bigger penalty. Also, Kate burnt down my house, and cannot return my house right away, then she is entitled to a bigger penalty as well.

How is rent different from interest? I do not understand that why Rent is halal and interest is not when they seem to be the same ideas.

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  • Which side are you on? Buyer or seller? – user12537 Nov 30 '15 at 21:04
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    From my experience, what a person pays when he/she fails to pay the rent on time is a fixed amount, not a percentage. Plus, the 10% interest you are charging Sam won't always be $1000 every month, it is 10% of his remaining loan. There is a HUGE difference between Rent and Interest. Let me know if you need more examples. – Atata Jan 29 '16 at 20:18
  • A simple google search would have answered this question really. first off: when I buy something or pay something off, no interest is ever involved. At the end of the day if Sam pays back 100% of the money and Kate pays n*$1000 where n=the number of months unpaid. Neither of them are paying interest. The result of Kate burning the house and paying you back for it is a seperate issue entirely – pythonian29033 Aug 5 '16 at 8:37
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Kate gets something each month. A roof over her head which she can leave and stop the money from growing each month. Sam cannot stop the money from growing no matter what he does aside from paying back the loan. He did agree to the terms initially but even if he did not spend the money he cannot pay back everything because of the interest.

I am using interest to have a house, but if I knew that would mean paying almost twice for it then I would have gotten a cheaper house to keep within my means. Thanks to the loan any time without a job will cost me dearly. If I move out right away and sell it for the same price then the result (ignoring selling costs) will be to only get 20-30% of the money I gave to pay back the loan. How bad I suffer due to the loan depends entirely on the loaner and the agreements we made, and I think the problem with this is that people are greedy and will more likely than not take advantage of the bad situation to get more out of you. Today there are more laws than 1400 years ago, but there are still many situations were people are abused and ripped off. Each country can be varying in this regard but I think the best place to get a loan would be the United States since there is less corruption. Even so its a stinky situation.

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The difference is that loaned money can be consumed but the house cannot be consumed. If you give someone an orange and ask them to return the orange after 5 months by paying 5 grapes then you are charging interest. But if you lend them a book and tell them to pay you 5 oranges for 5 months than you are just earning money for lending your property rights.

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