Company Gives House Building Loan Without Interest but Deducts Amount from Salary

18-5-2023 | IslamWeb

Question:

Aoa, I work in oil company and after period of 10 years my company give me house building loan without any interest. I hv to return back exactly the same amount which company give to me. Problem is that our company cut a minor amount of premium from our salary and insured that house building loan to some insurance company so that in case of employee death my oil company can claim that loan amount from insurance company. I dnt know that whether insurance company deals in Ribah or not. Now tell me that whether i can take that house building loan from my oil company or not.

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Answer:

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

If the employer requires the loan seeker to insure it and deducts an amount from the employee's salary for that purpose, then we have to look at the type of that insurance. If the insurance required on the employee is commercial insurance, then it is Haram (forbidden), because commercial insurance is deceit and gambling, in which case, it is not permissible to undertake such a loan even if the loan is free of usurious interest as long as commercial insurance is required, except in the case of extreme need, such as the inability to find a house, even by renting it, or by renting it but with unbearable hardship usually.

However, if the insurance is cooperative Takaful, it is permissible, because debt insurance is one of the legitimate guarantees such as surety.

Al-Ma’ayeer ash-Shar’iyyah reads: “It is permissible to make insurance on Islamic debts, but non-Islamic insurance is not permissible for them.”

Allah knows best.