Is renting halal?

Renting, hiring or leasing something is called ijarah in Arabic. It means you pay to use something for a time: a house, a car, a tool, or a person's work. All scholars agree it is halal.

• Allah tells us about Musa (Moses) in Madyan. A young woman said to her father: hire him. The best person to hire is someone strong and honest¹. Her father then agreed with Musa on eight years of work².
• Nabi ﷺ said every prophet looked after sheep. He said: yes, I looked after them for the people of Makkah, for a few qirats (small coins)³.
• On the Hijrah, Nabi ﷺ and Abu Bakr hired a skilled guide to take them to Madinah⁴.
• Rafi ibn Khadij, a Companion, was asked about renting out land for gold and silver coins. He said: there is nothing wrong with it⁵.

Why can you charge rent for a thing, but not for money?

Rent is halal and interest is haram. But both look like paying extra. So what is the difference?

• When you rent a car, the car stays the owner's. It wears out. If it is stolen or wrecked and it is not your fault, the owner loses. He earns rent because he takes that risk.
• When a bank lends you money, the money is spent. You pay back the same amount plus extra, whatever happens. The lender takes no risk on the thing itself. That extra is riba (interest), and it is haram⁸. See What riba is.
• Nabi ﷺ said: profit goes to the one who carries the loss⁹. Whoever takes the risk of a thing may take the income from it.

What makes a lease fair?

Allah says: O you who believe, keep your agreements¹⁰. A lease is an agreement, so both sides must know what they agreed to. Nabi ﷺ forbade deals with too much uncertainty¹¹. So three things in a lease must be clear:

• The use must be halal. Do not rent out a place for selling alcohol or for gambling. Allah says: do not help each other in sin and wrongdoing¹².
• Clear terms you agree to must be kept. Nabi ﷺ said: Muslims must keep the terms they agree to, except a term that makes the halal haram or the haram halal¹³. So a mileage limit, a no-pets rule or a notice period are all fine if both sides agree.
• A deposit is fine. The owner holds it in case of damage. He gives it back at the end, minus the cost of any real damage.
• The rent cannot go up in the middle of the agreed time, unless the contract already said how it would go up.
• Musa said: this is an agreement between you and me, and Allah is witness¹⁴. So write the lease down.

Who pays for what?

The scholars agree on a simple rule. The owner looks after the thing itself. The tenant looks after how he uses it.

• Scholars say the rented item is a trust (amanah) in the tenant's hands. If it gets damaged and it is not his fault, he does not pay.
• The owner may add his costs into the rent. But he cannot take rent and also push all the risk of owning it onto the tenant. That would be profit without carrying any loss¹⁵.

Ending a lease, and renting it on to someone else

• If the owner or the tenant dies: most scholars say the lease carries on with the heirs until it ends. Hanafis: the lease ends. Hanafis also allow ending a lease early for a real reason, like moving city for work. Other scholars say both sides must agree to end it.
• Renting it on to someone else (subletting): most scholars allow it, for a similar use, if the contract does not forbid it. Hanafis say do not charge more rent than you pay, unless you added something to the place. Follow your lease and your local law too.

How should you rent out your own property?

Renting out a flat, a shop or a car is a good, halal income¹⁶. Being a fair landlord is part of your religion.

A Muslim landlord

• Describes the place honestly, including its problems. Hiding damp is cheating. See Honest dealing, gambling and work.
• Fixes big problems quickly. He gives back the deposit fairly. He only takes money for real damage, not for normal wear.
• Is gentle with a tenant who is really struggling. Allah says about someone in debt who is in difficulty: give him time until things get easier. And letting the debt go as charity is better¹⁷.

A Muslim tenant

• Pays on time. Nabi ﷺ said: when someone who can pay keeps delaying, that is injustice¹⁸.
• Looks after the place as a trust. He leaves it as he found it, apart from normal wear.

Who can you rent to?

• Renting a home to a non-Muslim family is fine. What they do in their own home is their business.
• Renting a shop for a clearly haram business, like a bar, a betting shop or a casino, is not allowed¹⁹.
• A normal business that sells a few haram things, like a supermarket: scholars differ. Some say avoid it. Others allow it, because the shop is mainly for halal trade. Follow a scholar you trust.

Is a normal car loan allowed?

Many people really need a car for work and family, and Islam does not make life hard. But how you pay for it matters.

A normal car loan works like this. A bank or finance company lends you money. You buy the car. Then you pay back the money plus interest each month. That interest is riba, and all scholars agree riba is haram. Nabi ﷺ cursed the one who takes riba and the one who pays it²⁰.

• The name does not matter: APR, a finance charge, or a low rate. If you borrow money and pay back more, it is riba.
• A 0% deal is different. If you pay back only the price, with no interest, it is not riba. But read the small print for interest if you pay late (see below).

What are hire purchase and PCP?

These names are used in the UK and some other countries. Other places sell the same deals under other names.

Hire purchase (HP)

• You pay a deposit, then the same amount every month. The finance company owns the car until your last payment. Then the car is yours.
• It sounds like renting and then buying. But in most HP deals the payments are worked out as a loan with interest. There is an APR. There is extra interest if you pay late. And you carry all the risk of the car from day one.
• So most scholars say a normal HP deal is an interest loan with another name. Some say that if the full price is fixed from the start, with no interest and no extra charge for paying late, it is close to a sale on credit. Ask a scholar to look at the actual contract.

PCP (personal contract purchase)

• You pay a deposit, then small monthly payments for 2 to 4 years. At the end there is a big final payment (a "balloon"). You can pay it and keep the car, hand the car back, or swap it for a new deal.
• You are paying for how much value the car loses, plus interest on the whole amount. It is a loan with interest, so most scholars say avoid it.

A personal car lease (contract hire)

• You rent the car for a fixed time. You pay a fixed monthly rent and keep to a mileage limit. Then you hand it back. You never own it.
• Many scholars say this can be a real rental, so it is allowed. The company owns the car and you pay to use it.
• Other scholars are careful. Many lease contracts state an interest rate (in the US often called a "money factor"). Many add interest on late payments. Some make you carry every risk as if you owned the car.
• Both views are held by real scholars. Read the contract, and follow a scholar you trust.

What are the halal ways to get a car?

Nabi ﷺ often asked Allah to protect him from debt. He said a person in debt may end up telling lies and breaking promises²². So a smaller car with no debt is often better than a big car with a big contract.

Murabaha: buying on credit at a higher price

All four schools agree that a seller may charge more when you pay later than when you pay cash. But one price must be fixed when you agree. Nabi ﷺ himself bought food on credit and left his armor as a guarantee²³.

• The company must own the car first. Nabi ﷺ said: do not sell what you do not have²⁴. So it buys the car, then sells it to you.
• The price is fixed. It may be more than the cash price. But once you agree it, it never goes up, even if you pay late. If the price grew with time, it would be riba.
• Until you finish paying, the company may keep the car's papers, or a legal claim on the car, as a guarantee. That is like the armor Nabi ﷺ left²⁵.

Ijarah: an Islamic car lease

• The company buys and owns the car. You pay rent to use it.
• Because it owns the car, it carries the big risks: total loss that is not your fault, big repairs, and the insurance for owning it. It may add these costs into the rent.
• You look after the car day to day. You pay for damage you cause.
• At the end you hand it back, or you buy it through a separate promise (see the next section).

Some people say Islamic finance is "interest with a new name", because the monthly cost is similar. Scholars answer: the price may look the same, but the deal is different. The company owns a real car and carries real risk. Long ago, people also said trade is just like riba. Allah answered that He allowed trade and forbade riba²⁶. Still, check that the company really follows these rules.

Is rent-to-own allowed?

Rent-to-own means you rent something, and at the end it becomes yours. It is used for cars, homes, furniture and electronics. Islamic banks call it ijarah muntahia bittamleek (a lease that ends with you owning it).

The problem: two deals in one

• Nabi ﷺ forbade two sales in one²⁷. He also said you cannot join a loan to a sale, or take profit from something whose loss you do not carry²⁸.
• In a common rent-to-own deal, it is not clear what you are paying for. Is it rent, or the price? If you miss the last payment, you may lose the item and every payment you made. That is unfair and far too uncertain.

How scholars make it halal

Many scholars and fiqh councils (official groups of scholars), including the International Islamic Fiqh Academy, allow it when it is set up like this:

• Two separate steps. First, a real lease. Then, at the end, a separate sale or gift. The sale is not part of the lease contract.
• A promise at the start, not a sale. The owner promises that when the lease ends, he will sell it to you or give it to you as a gift. The sale price can be a small price, the market price, or the rest of the price.
• The owner carries the risk until then. During the lease, the company owns it. It pays for big repairs and for the insurance for owning it. If it is destroyed and it is not your fault, the company loses.
• Fair if things go wrong. If the lease ends early, what you paid counts as rent for the time you used it. Many contracts also give back part of what you paid above a fair rent.

Some scholars and fatwa councils do not allow the usual form. In that form, one contract is both rent and price at the same time, and you own the item automatically at the end. They see it as two sales in one²⁹. Both views are held by real scholars. Follow a scholar you trust.

For homes, many Islamic banks use a different way. It is a partnership: you buy the bank's share bit by bit, and pay rent on the part you do not own yet. That is explained in Buying a home.

What about late fees?

Once rent is due, or a price is owed, it becomes a debt. Adding money to a debt because it is late is riba. That is exactly the riba people practiced before Islam: pay now, or pay more later. Allah says: if you repent, you may keep the money you first put in, without wronging anyone and without being wronged³⁰.

But a company still needs a way to stop people paying late on purpose. Nabi ﷺ said: when someone who can pay keeps delaying, that is injustice³¹. So Islamic contracts do this:

• The customer promises to give a set amount to charity if he pays late. The company collects it and gives it to charity. It does not keep it as profit.
• Some scholars also allow the company to keep what it really spent chasing the payment, like a letter or a legal fee. But not a penalty that grows with time.
• If the person really cannot pay, Allah says: give him time until things get easier³². A good company, and a good landlord, will agree a plan.

A late-payment clause in a normal contract

Many normal contracts (a phone plan, a rent agreement) say you will pay interest or a fee if you are late. Scholars differ on signing them:

• Some scholars: do not sign a contract that has an interest clause if you can find another way.
• Many scholars: you may sign it if there is no real alternative and you are sure you will pay on time, so the clause never applies. Set up automatic payments.

Both views are held by real scholars. A Muslim landlord should not make profit from late fees. Charge only real costs, or give the fee to charity.

Are phone contracts and pay-monthly plans halal?

Phones, laptops, sofas and fridges are often sold on monthly payments. You take the item now and pay over 12, 24 or 36 months.

• This is usually a sale on credit, and that is halal³³. The total may be more than the cash price. That is fine, as long as the total is fixed when you agree.
• Scholars explain the hadith on two sales in one like this. The seller says "10 cash or 20 on credit", and the buyer leaves without choosing. Once one price is chosen, there is nothing wrong³⁴.
• Watch for interest. If the plan is a loan from a finance company with an APR above 0%, it is an interest loan. Pay up front, or choose a 0% plan.
• A monthly phone plan for calls and data is just paying for a service. That is ijarah (paying to use something), and it is halal.
• Fees written in the contract, like a fixed fee to end early or to upgrade, are fine if you know them when you sign.

Buy now, pay later apps and credit cards have their own rules. See Credit cards, buy now pay later and loans.

Can you insure the car?

• Car insurance the law requires: you may take it. Scholars agree on this.
• On extra insurance, like full cover or gap insurance, scholars differ. Some say normal company insurance has too much uncertainty. Others allow it. Takaful (Islamic insurance where members help each other), where you can get it, is the safer choice. If a lease or finance contract makes full cover a must, many scholars say you may take it.
• In an ijarah lease, the owner should pay the insurance for owning the car. You may still need driver insurance by law.

All the views, with their evidence, are in Insurance and takaful.

What do people wrongly think is haram?

• Paying more on credit than for cash. The four schools allow it, if the price is fixed at the start.
• Renting out a house or a car for profit. Halal and blessed, if you are fair.
• Hiring a car on holiday with the insurance the law requires. That is a normal rental.
• A deposit, a mileage limit, or a fixed fee to end early in a lease. These are terms both sides agreed to. They are not riba³⁵.
• A 0% pay-monthly plan. No interest, so no riba.
• Using a car you bought with an interest loan. The sin was in the loan, not in the car. Ask Allah to forgive you, and use the car.

Common questions

I need a car for work and I have no savings. What do I do?

First look at a cheaper used car, a halal finance option (murabaha or ijarah), or a 0% deal. Some families help each other with a loan that has no interest (qard hasan). If you really have no halal way, and no car means no job, speak to a scholar you trust about your situation. See Doubtful things, need and mistakes.

My rent agreement says I pay a fee if I am late. Can I sign it?

Many scholars say yes, if there is no real alternative and you are sure you will pay on time. Set up an automatic payment so you are never late. Some scholars say avoid these clauses when you can.

The heater broke in my rented flat. Who pays?

If it broke from normal use, the owner pays, because that is what the rent is for. If you broke it by misusing it, you pay.

Can I get a phone on a monthly plan?

Yes, if there is no interest. A fixed total for the phone, paid monthly, is a sale on credit³⁶. The calls and data are a service. If the phone is paid for by a loan with an APR above 0%, pay up front or choose a 0% plan.

I am a landlord. My tenant lost his job and cannot pay. What does Islam say?

He still owes the rent. But Allah says: give him time until things get easier, and letting it go as charity is better³⁷. Agree a payment plan, and follow the law on notices.

Can I take a rent-to-own deal on a sofa or a TV?

If it is really a sale with a fixed price paid in parts, and no interest, it is fine. If you lose everything when you miss one payment, or there are interest charges, avoid it.