Title: Loan with no iterest but with one time processing fee

Question: I am offered a loan for a tenure of 6 months without interest but one time processing fee of 1 percent and also Monthly EMI is flexible [i.e. I need to pay at least 5% of the outstanding amount]. Please let me know whether it is permissible to take this loan as there is no interest. If this loan is haram due to processing fee, can i pay the processing fee from the interest i get from my saving account. I am in badly need of money, have tried asking my friends before thinking of this loan. Please provide the clarity.

Answer ID: 46095Posted on: Sep 1, 2020

Bismillah hir-Rahman nir-Rahim !

(Fatwa: 1162/738/L=1434) In the above mentioned non-interest loan as you have not to pay interest hence you are allowed to avail this facility. If the institution which gives the loan takes some fees as service charge it is allowed to pay it and due to it the original loan shall not be termed as interest based loan (Ref: Ghair Sudi Bankari, p. 202-208). It is not lawful to pay the fees from interest money.