Is it ok to buy a vehicle via an equated monthly installment (EMI)?

Question

Is it ok to buy something via an equated monthly installment (EMI)? For example, I am planning to buy a vehicle which is of cost around 50,000(INR).

If I can't afford 50,000 outright, I have other option to buy a vehicle but EMI (paying monthly installments like 2,000(INR))

An equated monthly installment (EMI) is defined by Investopedia as:

"A fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full."

You can read full detail on Wikipedia.

Answer 1

Firstly, I did not go through what really EMI is. So far I know, EMI is a facility given to particular subscribers (card holders) to buy the product in the same market offered price, but paying the same amount in installments. Basically The Bank pays the full amount for you, and you pay your bank later on.

Example: Price of a Cell phone=30,000/= You have a credit card of XYZ Bank which has the EMI offer (6 EMI) for that particular device.

So, your bank pays the cell phone shop, and against your credit card, in each month you see a bill of 5,000/=

If you pay your bank (in each month) in due date, then there is no interest involved.

If anyway there comes interest, then that is HAARAM (though there are logic available on the internet to legalize it... but something that is clearly forbidden in Quran and Sunnah, no scope of logic comes in.... in fact shaitan had also a logic for not prostrating Adam).

But if no interest comes in, then that is a debt to the bank, and debt is allowed, but not encouraged for mu'mineens. A debt should be the last resort. There are lots of ahadiths, which states that Rasulullah (sm) and the Shahabas (ra) often used to seek refuge from Debt.

The Prophet (sm) used to seek refuge with Allaah from debt, and he used to say: “O Allaah, I seek refuge with You from sin and debt.” Someone said to him: How often you seek refuge from debt, O Messenger of Allaah. He said: “When a man incurs debt, when he speaks he lies and when he makes a promise he breaks it.” Narrated by al-Bukhaari (2397) and Muslim (589).

It is narrated by Abu Musa Ashari that the Prophet said: After the major sins which must be avoided, the greatest sin is that someone dies in a state of debt and leaves behind no asset to pay it off. (Darimi)

It was narrated that ‘Umar ibn al-Khattaab (ra) said: Beware of debt, for it starts with worry and it ends with war. Narrated by Maalik in al-Muwatta’ (2/770).

"Believers are merely those whose hearts feel wary whenever God is mentioned and whose faith increases when His verses are recited to them. On their Lord do they rely. Those who keep up prayer and spend some of what We have provided them with are truly believers" (Quran 8:2-4).

To know more regrading the dealings of Allah who dies with debt (seriousness of debt) please visit: http://islamqa.info/en/71183

Allah knows the best. May He guide us on right path.

Answer 2

Main keyword is "interest".

"Most Muslims and most "non-Muslim observers of the Islamic world" believe that interest on loans is forbidden by Islam. But while this is the “majority accepted view” among Islamic jurists, it is not the consensus (ijma)"

you can read more here

Answer 3

On the authority Abi Ab’dillahi al-Nu’man ibn Basheer (ra) who said: I heard the Messenger of Allah (peace be upon him) say: “That which is lawful is clear and that which is unlawful is clear and between the two of them are doubtful [or ambiguous] matters about which not many people are knowledgeable. Thus, he who avoids these doubtful matters certainly clears himself in regard to his religion and his honor. But he who falls into the doubtful matters falls into that which is unlawful like the shepherd who pastures around a sanctuary, all but grazing therein. Verily every king has a sanctuary and Allah’s sanctuary is His prohibition. In the body there is a morsel of flesh which, if it be sound, all the body is sound and which, if it be diseased, all the body is diseased. This part of the body is the heart”. -- [Related by al-Bukhari and Muslim] (sunnah.com)

Referring to the above EMI question, the above hadith suffices to explain what needs to be followed. Although you may not be directly dealing with interest, in the event you miss 1 payment, bank will levy interest just like the shepherd alluded to in the hadith.