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Fatwa CenterRuling of a House Purchased with Money Borrowed From a Bank
Question
The money that the Bank give as Principle amount on agreement to pay back with interest is lawful in itself to use for different needs ? Or that the money in itself is unlawful because of the agreement of paying interest on that and also that maybe some of that money contains interest money paid by other borrower? And if build a house or buy car from that money will those be lawful?
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.
Taking a loan from a bank with interest is a form of riba (usury), which is forbidden in Islam. In Sahih al-Bukhari and Sahih Muslim, it is reported from Abu Hurayrah (
) that the Prophet (sallallaahu 'alayhi wa sallam) said: “Avoid the seven destructive sins,” and he mentioned among them: consuming riba.
The Prophet (sallallahu 'alayhi wa sallam) also cursed the one who consumes riba, the one who feeds it to others, its two witnesses, and its scribe, and he said: “They are all the same.” [Muslim]
However, one should distinguish between the prohibition of the usurious loan contract and the prohibition of the money itself that was received. The sum the borrower took possession of is not forbidden in itself.
Whoever takes out a usurious loan and is able to repay it, must do so. But if he is unable to repay it, as is the reality in many such dealings, and he spends it on his permissible needs, such as building a house or buying a car, then the house or the car does not become forbidden merely because its price was paid from the money of this loan. This is because the prohibition is attached to the borrower's liability, not to the loan itself.
Furthermore, borrowing from a usurious bank is forbidden because of the riba, not because the money was paid to the bank by people.
Accordingly, what is obligatory upon one who has fallen into this is to repent to Allah, the Exalted; regret what he did, and to resolve not to return to riba.
Lastly, whatever he owns, whether a house or a car, is permissible.
Allah Knows best.
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