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Collateral loans

Fatwaa ID: 1547

Question:
السلام عليكم و رحمة الله و بركاته
Is it permissible take/give collateral loans? There’s no interest involved. In general, is it permissible to have a collateral?

Answer:
In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

It is permissible to give and accept collateral when taking or giving loans. This is known as rahn. The collateral remains as a security for the loan taken. The creditor may not derive any benefit from the collateral. It will simply remain in his care until the loan is returned.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York
https://askthemufti.us/

01/12/1445 AH – 07/30/2023 CE | AMG1-3287

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين

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