Are Student Loans Haram?
Since student loans were first introduced in the United Kingdom in the 1990s they have proven to be problematic for Muslim students. The primary reason for this is that student loans incur interest - something that is prohibited in Islam under Sharia rules.
For many Muslim students who want to be compliant with Sharia laws relating to financial transactions, taking out a student loan is not seen as a viable option.
Riba In Islam
The literal Arabic meaning of the word riba is 'increase', 'growth', 'excess', or 'addition'.
According to Sharia laws, an increase of a debt owed or repayment of a loan is considered to be riba, or interest. This is strictly forbidden in Islam. Both the payment of interest and the receipt of interest payments are considered to be contrary to Islamic Sharia rules.
The reason Islam does not permit interest is that it is considered to be a means through which the poor remain poor, and the rich get richer. There is considered to be an inequality between the parties and within the transaction.
Riba is generally deemed to increase the gap between the poor and the rich in society and this goes against Islam and the social responsibility message that permeates Islam.
Student loans within the UK are currently repayable with interest, so this creates a dilemma for Muslim students.
Interest And Student Loans
As student loans require repayments that incur interest, many Muslims deem them to be an unacceptable way of funding their higher education goals.
There has been a great deal of debate within the Muslim community about student loans and the issue of riba.
Islamic Concept Of Finance
One important thing to note for anyone considering taking out a student loan is that traditional western banks and lending organisations treat money solely as a commodity in business.
By contrast, in Islam, money is considered to be a medium of exchange with a measure of value only.In Islam, money performs a social role.
The value of the money is stored within it, not outside it. This is one of the primary reasons riba / interest is not permitted.
Student Loans - History
Student loans have had a variable history. In the 1960s, 12% of school leavers went on to university. This represented 1 in 10 students. There was no such thing as student loans in the 1960s. University fees were actually paid fully by local education authorities. Students left university with little to no debt.
In addition to having fees paid, university students could also apply for a means tested annual grant to cover their living costs.
In the 1970s the number of school leavers attending university increased slightly to one in seven. By the end of the decade, this figure had dropped again as there was a squeeze on university funding.
The 1980s saw a huge increase in the numbers of students wanting to go on to higher education. The then education secretary, Kenneth Barker, pushed for higher numbers of young people to attend university and increase their skill sets.
By 1990, one in five school leavers was attending university. However, the maintenance grants had not increased by much, so in 1989 the Tory government introduced student loans akin to mortgages. These loans were to account for having no increase in the annual student grants and were intended to bridge the gap between the funds available and the increased cost of living. Grants of up to £2265 were available on a means tested basis.
Higher education and university entry really saw a boom period in the 1990s onwards. More and more young people were going to university and the number of courses available increased.
The Labour government got rid of the grant in 1997 and replaced it with a new policy and system whereby a £1,000 means tested tuition fees was available, alongside low cost loans.
By the early 2000s, many more young people were attending university. The Labour government pledged to raise the percentage of young people going to university to 50% and they wanted to make sure students had an incentive to study further. Tuition fees amounted to £1,100 per year, and this was offset by loans of up to £3,950.
In 2006, tuition fees were raised to £3,000 per year which become payable once students graduated and were earning above £15,000 per annum. Students were informed that the repayments were to be made on the 9% of income over the relevant threshold, with inflation-only interest rates.
Coming to modern day student loans, tuition fees are currently £9,000 per year and additional loans are available that could amount to over £12,000. This means that an average university student who undertakes a 3 year degree will come out of it owing a considerable debt. This debt accrues interest.
In the United Kingdom, it is the Student Loans Company that administers and monitors student loans. The Student Loans Company is the organisation that calculates the amount payable to individuals and ensures the payment reaches the right bank account.
INTEREST ON STUDENT LOANS - IS THIS RIBA?
Opinion is divided about whether student loans are considered to be halal or haram.
There are some Islamic scholars who believe that student loans are inherently haram and non Sharia compliant as they incur interest. However, there are also scholars who have the opinion that student loans are halal.
Let's have a look at the arguments for and against student loans.
Fatwas That Deem Student Loans To Be Haram
The Al Qalam Institute did its own research and issued a fatwa relating to student loans and their permissibility for Muslim students. The issue they looked at in detail was whether the repayment of the student loans was commensurate with inflation rates, or whether the repayments incurred 'bolt on' interest payments.
The research the Al Qalam institute undertook concluded that the student loans at the time of the fatwa (2013) were deemed to incur riba. This meant that student loans were contrary to Islamic laws relating to finance and loans.
The reasoning behind the judgement was that student loans DID attract riba and were not simply attracting inflation based increases in repayments.
According to the Institute, irrespective of the need for the loan (ie to further a person's education, knowledge, and prospects), if a loan incurs interest then it is prohibited.
There is still a great deal of ongoing debate amongst scholars about whether the loans are strictly linked to index price/inflation raises or whether they do actually incur interest outright.
It is likely the debates will continue for some time until any consensus is reached.
Arguments And Fatwa In Favor Of Permitting Student Loans
There are, however, other schools of thought that have the opinion that by their very nature, student loans do not fit the traditional definition of a loan.
Some Islamic scholars have raised the question of whether student loans do in fact incur riba and whether they should fall under the definition of what a de-facto loan is.
The reasoning behind this argument is that any student who obtains a student loan will never fully take ownership of the loan amount.
The student loan itself is seen as an investment towards a future of learning.
As the bulk of the student loan is given straight to the university or institute of higher education, the student never actually receives full ownership of the money. Without ownership it is questionable as to whether student loans are actual loans under Islamic finance principles.
In addition to the above, it can be argued that as the loan only becomes repayable once a student earns over a certain threshold, there is no automatic interest based repayment.
Shaykh Dr. Haitham al-Haddad has issued his own fatwa relating to student loans. It is his opinion that taking out a student loan is permissible. He maintains that no riba is involved in the student loan transaction.
Shaykh Dr Haitham al-Haddad has researched this issue at length and concluded that student loans within the UK are permissible under the rules of Islam.
The Shaykh raises the following points to note when arguing that student loans are halal:
- the student never receives the full loan amount
- the student does not have full control of where the money is spent nor is there any element of profit
- the loan is eventually written off (cancelled if you die)
- the minimum earning threshold applies before any repayment is due
According to the Shaykh, the points mentioned above render the student loan as an entity that is different from the traditional loan, or qard.
The element of human ownership is not fulfilled as the monies are paid (mostly) directly to the university in lieu of tuition costs.
Of course, opinions on this issue continue to remain divided.
Students are encouraged to undertake their own research and due diligence.
Want Versus Need
Some scholars are of the opinion that there will never be a clear cut answer on whether student loans are considered to be halal or haram.
However, students should always consider whether their desire to pursue further education is a want or a need. If university is seen as a want - that is, it is not essential - then taking out extensive student loans might not be a good idea.
However, for those people who have no choice but to go to university such as doctors, lawyers, and dentists, perhaps there is an argument to say that there is a real need.
Not everyone who attends university is entitled to a bursary or scholarship and it would be a shame for these students to miss out on learning or advancement.
What is clear is that many Muslim students (and parents of students) have felt unable to access Sharia compliant and appropriate student finance. This has affected their employment prospects and their career progression.
Whatever your view of student loans, the UK does need to identify and create solutions that are accessible for Muslim students.
Conclusion
Ultimately, when deciding if student loans are halal or haram. students should be doing their own research on whether they feel comfortable taking out student loans.
Always seek out the knowledge of experienced and knowledgeable scholars. Use a website that you trust to find out more information, and read the opinions and advice of scholars who have researched the topic extensively.
Whilst not all Islamic scholars agree on whether student loans are halal or haram, what is clear is that the subject is still open to debate. Perhaps this is the reason that more and more universities are directing their Muslim students towards Sharia compliant loans and finance options.
In addition, the Federation of Student Islamic Societies, and the National Union of Students have been working collaboratively with the government to find alternative finance solutions for Muslim students who do not want to go down the traditional student loans route.
In the meantime, it is worth having a look at the various scholarships and bursaries available. These could be an alternative form if financing but it is rare to find one that will cover a full university course plus living costs.
In addition to this, many UK banks offer interest free current accounts up to a certain limit so it is also worth checking these out.
The UK government has been looking into having an alternative financing option for Muslim students to ensure that they have access to higher education.
In 2014, the government approved a non-interest based student loan model, and this is still under review.
However, in June 2022, the Federation of Student Islamic Societies reported that a date has been finalised for the non-interest based student loan and it would be available in 2025.
Until then, of course, the most beneficial course of action would be to seek out halal funding options. There are service providers available who provide Sharia compliant loans and products. In addition, there are some Muslim charities who will fund higher education.
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Introduction
Zakat is the third pillar in Islam and plays a significant role in the way Muslims live and conduct their financial affairs. The recipients of zakat are a very specific group of people as outlined in the Quran, and there is a specific calculation involved.
Our online zakat calculator assists with calculating the amount of zakat that is owing.
Understanding Zakat And Its Obligations
WHAT IS ZAKAT?
The word zakat means growth and purification in Arabic and refers to the mandatory obligation to give a portion of wealth accrued to charity. Zakat is a fundamental obligation for all Muslims who meet the criteria, and its purpose is to purify wealth and create economic equality and enhance social welfare.
According to Islamic teachings, zakat is a fundamental act of worship. The Quran (2:110) states: 'Establish prayer and give zakat'
WHO NEEDS TO PAY ZAKAT?
Muslims who are required to pay zakat must first understand if they have accrued the minimum amount of wealth required before they become eligible to pay zakat. This is known as nisab and this is worked out based on the equivalent of 85 grams of gold or 595 grams of silver.
Those eligible to pay zakat include the following:
- Adults who have reached puberty and have wealth over the nisab threshold.
- Adults who have full mental capacity.
WHAT ASSETS COUNT TOWARDS ZAKAT?
Zakat is payable on different types of wealth:
- cash
- silver
- gold
- business assets
- investment income
- agricultural produce.
When And How Much Zakat To Pay
Zakat is due on wealth that you have been in possession of for one lunar year. It's also important to note that you can deduct immediate debts from zakatable wealth (see below).
You can pay zakat at any time of the year through instalments or in one lump sum.
Calculating Zakat Step-By-Step Using A Zakat Calculator
Muslims are expected to pay 2.5% of their zakatable wealth every year. Follow these steps to work out how much zakat you need to pay:
- Determine your zakatable wealth total by adding up your assets and deducting immediate debts.
- Ensure that you meet/exceed the nisab threshold
- Apply the 2.5% rule
- Use the online zakat calculator to work out what you need to pay
Always visit a reliable zakat calculator website.
Deductions And Liabilities
There are certain debts and liabilities that be deducted when making your zakat calculation.
The following deductions are allowed:
- short term debts such as credit card balances and small loans that become due in the zakat year.
- for long term debts such as mortgages you can only deduct the payment owing in that zakat year.
- living expenses including bills, rent, good costs, transport.
- unpaid wages to employees.
- business liabilities for the zakat year.
Please note that future debts and expenses are not deductible.
Zakat Payment And Its Impact
Zakat is more than a financial payment, it goes beyond wealth distribution into the realms of spiritual growth, economic justice and fulfilling an important religious obligation.
Paying zakat on time fulfils an essential Islamic obligation and strengthens the relationship with Allah.
Timely payment of zakat leads to increase in blessings and purification of our wealth.
How To Pay Your Zakat
Zakat can be paid in different ways. You can pay zakat direct to individuals who are eligible to receive zakat. Zakat can also be paid to charities and global zakat funds.
Many Muslims choose to pay zakat online by utilising online zakat calculators.
Receiving Zakat
There are eight groups of people to whom zakat can be given:
The needy (this includes people whose earnings fail to cover basic needs such as food, home, water, clothing)
Those in poverty (who have little to no personal belongings and no means of earning a living)
Those employed to administer zakat monies
The wayfarer
People whose hearts have been reconciled to the faith In the cause of Allah (SWT)
People in debt
People in bondage
Recipients of zakat should not be members of your immediate family such as your spouse, parents or children. Other non-immediate relatives can be recipients of your zakat payments.
Many people give to charity throughout the year, for any donation to qualify as fulfilment of the zakat obligation, then there must be an intention to give the money as zakat.
Common Questions And Expert Advice
WHAT IS NISAB?
Nisab is the minimum amount of wealth you need to have before you become eligible to pay zakat. Typically nisab is the equivalent of 595 grams of solver or 85 grams of gold.
DO I PAY ZAKAT ON MY HOME?
Zakat is not payable on your primary home. If you have rental properties then zakat is payable on the income generated.
CAN I GIVE ZAKAT TO MY FAMILY?
You cannot give zakat to immediate family, ie those already dependant on you such as your partner and children. You can pay zakat to extended family members if they are eligible.
ARE ONLINE ZAKAT CALCULATORS ACCURATE?
Yes, as long as you insert the correct information based on your personal circumstances then zakat calculators are an excellent way to calculate your zakat.
IS ZAKAT PAYABLE ON MY RETIREMENT SAVINGS?
If you have full access to these savings and you meet the nisab threshold then zakat is payable.
WHAT IF I FORGET TO PAY ZAKAT?
Use an online zakat calculator to calculate what you owe and pay your zakat as soon as you can.
IS ZAKAT PAYABLE ON STOCKS AND SHARES?
Yes, if the value exceeds the nisab threshold then zakat is payable.
SHOULD NISAB BE CALCULATED ON GOLD OR SILVER VALUES?
In the United Kingdom you can use either the gold or silver value. Many scholars believe that using the value of silver is preferable as it means the amount of zakat increases. If you have assets that mainly consist of gold then it is sensible to use the gold nisab.
WHAT IS THE ZAKAT YEAR?
The zakat year begins on the date on which you first possessed the wealth that took you over the nisab threshold. This will be the start of your zakat year. The zakat payment will therefore become due when the year has elapsed.
HOW DOES ZAKAT APPLY TO YOUR INVESTMENTS ON THE WARDUS PLATFORM?
For all of you that pay zakat, it would be on the total outstanding amount payable to you from your investments via Qardus. The investment is based on a financing arrangement which involves the buying and selling of commodities, and therefore, we believe that these assets are zakatable in nature. Therefore, investors who pay zakat would use the capital plus the profit due to them to calculate the amount of Zakat payable.
Please note that Qardus does not provide tax or other financial advice and that if advice is needed, you should consult an appropriately qualified professional.
Conclusion
Calculating zakat accurately and paying it in a timely manner ensures that it reaches the most vulnerable in society. Paying zakat fulfils one of the core pillars of Islam.
Using an online zakat calculator not only ensures the payment you make is calculated accurately, it saves you time and helps you to make the sometimes complex set of calculations.
Zakat calculators also guide you to eligible recipients and make it easier for you to track your zakat payment history and accountability. The calculations eradicate errors and provide an audit trail. If you have any specific questions about your zakat payment, always remembers to consult with expert scholars.
Use the Qardus zakat calculator here.
Please note that the prices information and values mentioned above are for example purposes only. For an accurate figure of the zakat you are liable to pay then it is always best to use the zakat calculator, and also conduct your own research and obtain qualified advice where required.
Qardus do not offer financial or tax advice and if advice is needed, this should be sought from a qualified professional.
Introduction
Cryptocurrency is essentially a digital currency exchange and digital payments platform that uses blockchain technology. The technological and digital revolution over the last few decades has meant that innovative payment systems have been created and utilised, and cryptocurrency is one of the major breakthrough payment systems for business and personal finance use. Whether or not cryptocurrency is halal or haram is a debate that is ongoing between Islamic scholars.
This article will examine cryptocurrency, Islamic interpretations, and the types of cryptocurrencies available.
Cryptocurrency
Although there are over 2,000 cryptocurrencies on the market now, Bitcoin is probably still the most known form of cryptocurrency in the blockchain market, and was the first cryptocurrency coin to go mainstream but there are other cryptocurrencies entering the market.
For Muslims across the Islamic world, the question arises as to whether crypto payment platforms are deemed to be halal or haram in the eyes of Allah and in accordance with Shariah principles, and whether as a currency it prevents money laundering. Whether or not cryptocurrency is halal or haram depends on the how a specific cryptocurrency aligns with the principles of Islam.
Cryptocurrency - Characteristics
One of the defining aspects of cryptocurrency is that there is no central authority such as a Government that authorises it or records it. Cryptocurrencies operate on decentralised networks using blockchain technology.
Most cryptocurrencies have a limited supply, or at least a capped supply. Transactions are transparent and traceable, but there is also a degree of anonymity of parties. One the main advantages of cryptocurrency is that it offers global accessibility. It can be received anywhere in the world - all you need is an internet connection.
For Muslims, cryptocurrency does tick a lot of the Islamic finances boxes when it comes to transparency and traceability. However, ultimately it is the duty of every Muslim to be seeking knowledge, and this guide will address the use of the cryptocurrency market and its intrinsic value.
This article will consider whether crypto currency is permissible as a form of actual money under Islamic laws and in the Islamic world. We will consider the views of Islamic jurists and scholars on this emergence of what is considered to be new money addressing the question of is cryptocurrency halal.ISLAMIC SCHOLARS INTERPRETATION - IS CRYPTOCURRENCY HALAL?
A comprehensive Islamic law interpretation, one that sparked a massive rise in Muslim investment in Bitcoin and Ethereum in 2018, was provided by Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) who looked at the question of is cryptocurrency halal as a money supply. He argued that Bitcoin is permissible under Islamic principles.
Mufti Abu-Bakar considered arguments that crypto itself was speculative when it comes to personal finance, but his view was that all currencies have a speculative element and this did not automatically deem cryptocurrency as haram.
Crypto Currencies
Islamically, if a business does not have an element of appropriate loss probability within its assets is not strictly trading in a Sharia compliant manner. The Grand Mufti of Egypt, Shaykh Shawki Allam believes that cryptocurrency is haram and he is joined by other Shariah scholars from the Middle East and beyond including Shaykh Haitham Al Haddad who see crypto as high risk. Their argument is based on the notion that crypto itself does not hold enough credibility as a currency to be deemed to be halal.
However, many other Sharia scholars believe that crypto itself does confirm to Sharia money rules and Muslims are permitted to invest in crypto.
Islamic scholars who believe that cryptocurrency money and digital assets are halal include Ziyaad Mahomed, Shariah Committee Chairman of HSBC Amanah Malaysia Bhd, and Mufti Faraz Adam. These views lend credence to the notion that Muslims can invest in crypto.
Arguments in favour of crypto being deemed halal include:
- There is often a lack of riba (interest). Crypto operates on decentralised platforms without any central authority. This usually means there is no interest charged or payable.
- Crypto is used as a medium of exchange with a legitimate purpose in financial and economic transactions.
- Technologically, crypto is neutral. Scholars argue that it is the use of the crypto that determines if it is Sharia compliant or not.
- The fact that crypto is generally thought to be scarce means that it is easier to avoid speculation and uncertainty and this aligns with Islamic finance rules.
Islamic Scholars
As mentioned above, one of the main reasons Islamic jurists and scholars from Muslim countries argue that cryptocurrency is halal, is that the concept of the blockchain and other cryptocurrencies are inherently anti-interest when looked at from a money generation source or perspective. Crypto operates outside of conventional banking systems and interest-based transactions.
Islamic banking laws are also anti-interest so the technology, pricing, and buying and selling of cryptocurrency money is deemed halal by many Islamic scholars who rely on the teachings of Prophet Muhammad PBUH when seeking guidance about permissibility (ultimately, only Allah knows best).
Given that crypto has a finite supply, it is less likely to be subject to inflation. This means it can maintain a fairly stable value - again an important element of Islamic finance.
Crypto Blockchains And Islamic Finance Principles
Blockchains refer to the blocks of technology used to record digital cryptocurrency transactions. Blockchains act as a system of record and the reason this form of technology is so important is that it is virtually impossible to hack, change or cheat the blockchain platform or marketplace.
With the use of blockchain, centralized financial institutions and establishments are not needed as no central control is required. This also means that crypto trading (and the stock market) is more transparent.
According to many Islamic scholars and religious leaders, this addresses the question of is crypto halal within Islamic Finance rules and Islamic law more generally.
As cryptocurrency money is deemed permissible and halal under Islamic Sharia rules this has unlocked the crypto investment market to a global Muslim community with increasing numbers of Muslims with an interest in buying crypto and use it as a form of currency.
In terms of business practices, there are some basic principles (discussed in this article) relating to crypto and cryptocurrency trading that help many Muslims to decide if their entrepreneurial journeys and endeavours are permissible or strictly prohibited.
Consideration And Commercial Value - Is Crypto Halal Or Haram
From the perspective of Islamic contract rules, there must be an element of consideration when answering the question is crypto halal - there must be Mal. Mal refers to possession and effective storage, and cryptocurrencies meet the criteria required as they can be possessed and stored and have commercial value (Mutaqawwam).
Crypto is a real and viable digital asset, its worth and value lies in what is paid for it, and it is capable of being owned and traded commercially so the Shariah requirements are satisfied and the the question of is crypto halal can be answered.
Shacklewell Lane Mosque
The Shacklewell Lane Mosque in East London became one of the first mosques in the UK to accept cryptocurrency donations and Zakat contributions in 2018 during Ramadan. This mosque deemed cryptocurrency halal and permissible and generated a lot of interest on the topic of the permissibility of crypto more generally under Islamic law.
Digital Currencies, Money Laundering And Shariah Law
Islamic finance principles dictates that in order for income, or investing in any product or asset, to be deemed halal it has to meet certain criteria. The principles of Shariah law should be applied to the financial systems we operate in and there has been some discussion amongst Muslim scholars about whether rules devised centuries ago can still be applied to a technologically modern digital financial marketplace.
Whether cryptocurrency is halal or haram centres on the rules of Sharia law.
Is cryptocurrency halal? For many Islamic scholars, the answer quite simply is yes. Shariah principles can be applied to modern crypto analysis and digital currencies as they are based on social justice, accountability and ethics which transcend all forms of financial transactions. As long as there is no illegal activity, then trading or investing in crypto should not be deemed to be contrary to Shariah principles.
Investments, Islamic Banking Law And Illegal Activities
There has been some discussion amongst Muslim scholars around the use of cryptocurrencies for illegal activities such as gambling, drugs, and money laundering. Critics of Bitcoin also argue that it is not legal tender as it is not backed by any central government that assigns its value and maintains regulatory standards, and it is therefore deemed to be speculated trading.
However, Islamically the use of an item that is deemed halal for an unlawful purpose does not make the original item halal. Whether it is halal or haram depends on the multiple factors.
Currency Ownership
Ownership of the currency remains with the owner according to Muslim scholars, and the coins/tokens are kept in an e-wallet. This means that investors can take part in trading as and when they want, retaining control of their assets.
As mentioned above, the publication of the working paper conducted by Mufti Muhammad Abu Bakr clearly identified that cryptocurrency is permissible under Shariah rules.
For Muslims worldwide this could have huge implications for the payment of Zakat monies that are made to the poor and to charities globally. If Muslims make up 25% of the world's population and hold approximately £1.04 billion in bitcoins, this means that £26 million is due in Zakat contributions. [1]
Medium Of Exchange
Cryptocurrency operates as a medium of exchange across the globe. This means that it can operate in legally diverse and unpredictable environments, often making it more accessible than mainstream finance options. It is a valid form of currency that holds purchasing power.
Although vulnerable to market changes, crypto coins such as Bitcoin and Ethereum are deemed to be a legitimate medium of exchange, available for use in transactions and trading. Although crypto has not yet reached the status of being a globally accepted medium of exchange, it is fair to say that it is on the way to becoming so. Commentators expect crypto to appreciate over the course of time and to store value.
Cryptocurrency Guidelines
The development of Shariah compliant cryptocurrency guidelines provides Muslims with the opportunity for ethical investments. From a financial perspective, Islamic charities could benefit hugely from Zakat and other donations as a result of crypto investment.
Many banks and financial establishments globally are recognising crypto as a financially viable medium of exchange, and this makes it easier for investors to continue to trade, buy and sell cryptocurrency.
With billions of Muslims worldwide, and the growth of crypto, it seems clear that what is perhaps needed is some form of shariah compliant cryptocurrency guidelines for Muslims to follow. This would enable Muslims to assess themselves the validity of cryptocurrency when assessed against Islamic finance rules.
Contracts
In terms of whether contracts relating to crypto are Shariah compliant, given that the contractual relationships in crypto are based on smart contracts using blockchain technology, this means that the process can be made increasingly secure and automated.
This not only reduces administrative complexities, confusion and errors, but also ensures that banks are more likely to accept the contractual relationships created.
In demonstrating Shariah compliance, cryptocurrency is earning legitimacy across the Islamic finance world. Cryptocurrency agencies are springing up across the Muslim world such as One Gram in Dubai, and Hello Gold in Malaysia.
This adds further legitimacy to the rulings that cryptocurrency is halal and can be utilised by Muslims and Islamic financial institutions. Of course, there needs to be ongoing discussion to consider is crypto halal as it operated within a dynamic and changing industry.
As the crypto market continues to evolve more questions will need to be asked, and each crypto coin should be analysed against Islamic finance principles to check for permissibility. However, as things stand right now, crypto is recognised as an asset under Sharia law and this lends it legitimacy. The things to be careful of are making sure that any cryptocurrency you are involved in does not link to any haram things and industries or activities or any form of money laundering.
Whilst there is no central body who can make a final ruling on whether crypto is halal or haram, but as there is no element of interest (riba) and no exorbitant fees relating to crypto the interest from Muslims is growing. Crypto can be used within Islamic finance principles to make ethical investments and wealth management in a Shariah compliant way. This could unlock the cryptocurrency investment market to billions of Muslims worldwide who are looking to enter the crypto market as investors.
As the currency is still in its infancy it is important to keep an eye on all new developments and to assess and analyse changes in the marketSource:
[1] https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-halal-london-mosque-donations...
The purpose of Debt Consolidation is to reduce your debt and reshuffle it to make it more affordable to pay off.
Debt Consolidation works by combining multiple debts into one manageable pot. For example, if you have numerous debts that have a combined total of £10,000, you can get a single £10,000 loan to pay off those debts. You then would repay the £10,000 loan in one single monthly repayment.
Debt Consolidation can also reduce the interest you need to pay by having all your debt in one pot, at a lower interest rate.
Overdraft loans can take different forms, such as cash advances, business debt, and credit card debt. Keeping track of various debts and the interest required to be paid on them can be exhausting and time-consuming.
You may have various debts from different providers, but these debts are first paid in full before monthly repayments are made to a single provider. This way you are only accountable to one provider, keeping things simpler and straightforward.
For example, Sarah has a credit card with Santander, an overdraft with Barclays, and an asset finance loan she’s taken against a product. Consolidating these debts into a single loan allows Sarah to gradually chip away at her debts to one single provider.
Another example would be Ahmed, who takes out two business loans with the same provider. He now wants a third to invest further into his business. Just like Sarah, Ahmed can consolidate the loans he has already taken into one, straightforward loan from a single provider.
WHAT ELSE CAN DEBT CONSOLIDATION BE USED FOR?
Examples of different types of debt a consolidated loan can be used to combine:
- Credit card debt (consolidated loans help reduce the impact of the high APR - annual percentage rate - charges most credit cards have).
- Personal loan debt (these are often used to fund a car purchase, a holiday, or home improvements).
- Overdraft (most banks charge high-interest rates on overdrafts which can lead to substantial debts that can be financially crippling).
- A Store Card (like credit cards, store cards often have high APRs and fees, despite initially offering front-end discounts).
- Payday Loans (loans which can be paid directly into your bank account but have high-interest rates attached that can make repayment difficult).
- Bailiff debt (such as unpaid Council Tax bills, parking fines, court fines and county court, high court or family court judgments).
How Debt Consolidation Works
First, you’ll need to establish the total sum of your existing debts.
You can then take out a loan which will cover the total cost of the outstanding debt. When you’re looking for a new provider for a debt-consolidating loan, you will want to find a loan that works with your budget.
The idea is to create straightforwardness, simplicity, and manageability by consolidating your debts. So when choosing a new loan provider you’ll want to pick a loan repayment plan which is manageable within a reasonable time frame you know you can pay the loan back in.
Like any other loan, a debt consolidation loan is available in two forms:
AN UNSECURED LOAN
This is a personal loan that does not require an asset, such as your home, to act as security for the loan.
A SECURED LOAN
This is a loan in which you attach an asset, like your home or a car, as security. In the instance where you are unable to repay the agreed-upon loan, the loan provider can repossess the asset put forward by you as a security, where they can then sell it and recoup the loan by another means.
The Pros And Cons Of Debt Consolidation
BOOSTING YOUR CREDIT SCORE
Keeping to a single monthly repayment consistently will improve your credit score, giving you greater financial flexibility into the future. Alternatively, your credit score may be at risk if you cannot meet the monthly repayments.
LOWER OVERALL INTEREST RATES
Debt consolidation loans often have lower APRs than alternatives like payday loans, or credit cards.
EASIER DEBT TRACKING
Managing one repayment a month is much easier than several at a time.
YOUR ASSETS MAY BE AT RISK
If you choose a secured loan any asset you use as security for that loan will be at risk. This could be your home, car, or any asset the loan provider can reasonably be expected to sell should you be unable to meet the monthly loan repayments.
Ways To Consolidate Debt
O% INTEREST, BALANCE-TRANSFER CREDIT CARD
Balance-transfer credit cards are designed to let you move existing debt from one credit card - or several - to another card from a different provider. The purpose of this is to pay less interest on the transferred money. By doing this you will be able to clear your debt faster, because all of your repayments will be going towards paying off your debt, instead of being used to cover the interest.
When you receive a balance-transfer credit card you pay off the balance on your existing credit card using the new credit card. You then make repayments on your new balance transfer card to pay off the debt.
By using a 0% balance transfer card, you won’t be charged interest on the transferred balance for the duration of the interest-free period.
A DEBT CONSOLIDATION LOAN
A debt consolidation loan can help you gain greater control over your finances. Debt consolidation loans often offer terms between one and five years. In general, longer loan terms require you to borrow a more significant amount of money, so they may not be available if your consolidation loan is less than £10,000.
FEES AND CHARGES FOR DEBT CONSOLIDATION LOANS
It’s important to be aware of some of the high fees some companies charge for arranging a loan. You should read the small print carefully for any extra fees or charges before you sign anything. Check to see if there are any costs associated with paying off the existing loans early. This could cancel out any savings you make. Avoid paying a fee for a company to arrange the loan on your behalf, that is, unless you’re receiving advice and you’re sure it's worth the cost.
IF YOU CHOOSE A DEBT CONSOLIDATION LOAN
Get advice before you make a final decision. If you choose to go ahead with a consolidation loan, it may be worth talking with an independent financial adviser who might be able to find the most suitable product for your needs. Avoid just looking at the annual percentage rate (APR), or the annual percentage rate of charge (APRC) for secured loans. The APR is the interest you’ll be charged, and the APRC will include the extra costs such as an arrangement fee.
Qardus does not provide financial advice.
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