The Islamic Ruling on Rent-to-Own Contracts

In the Name of Allaah…

Shaykh Saalih al-Fowzaan mentions that the Council of Senior Scholars has studied the modern “Rent-to-Own” schemes, and they have ruled that they are impermissible transactions, due to the prohibition of two contracts in one.


Video: (different)

Rent-to-own schemes may also include some so-called “installment plans” for automobiles and property, where legal ownership remains with the seller until the payments are complete, which is essentially a rent-to-own contract cleverly disguised as an installment plan.

As an important reminder, we live in times of widespread deception and corruption, so let every Muslim be extremely cautious in how he approaches complex business transactions.

Written by: Moosaa Richardson

11 thoughts on “The Islamic Ruling on Rent-to-Own Contracts

  1. As-Salaamu Alaykum wa Rahmatullahi wa Barakatu,

    Jazakallahu khayran and thank you for posting something on this topic. These kinds of things are becoming more and more widespread, and the commentary above is very beneficial.

    I have been thinking a lot about structuring large purchases between multiple parties (like buying houses in the west) in a way which is compliant with the perfect laws that Allah gave to us by way of Muhammad (may Allah’s peace and blessings be upon him), which would also be a sound financial decision (as much as one could judge such a thing) for all parties involved. To whom should I direct inquiries/ideas on the topic? Sadly, I do not yet speak Arabic, and I do not have access to scholars who could address these inquiries/ideas. I also do not want to share them openly, as someone could cause great harm with them if they are not halal.

    Any advice you could offer in this way would be greatly appreciated.
    Jazakallahu khayran.

  2. What about 401Ks? Is it permissable to have stocks in the stock market? I’m going to school for business and i am afraid that i may be offered stocks in a 401K.

  3. Assalaamu ‘alaykum, I don’t know if I’ve quite understood this.. I want to buy a phone and the only way for me to do so is to sign a contract where I pay an amount of money (depending on my calls and texts) every month and the contract continues this way until 2 years time. Is this a so called “rent-to-own” contract?

  4. As-Salaamu Alaykum wa Rahmatullahi wa Barakatu,

    I would like to buy some furniture, and the furniture store is offering me a 7% discount if I pay cash instead of the Rent-to-Own (most of their customers do the latter). I only intend to pay cash anyway, not to receive the discount, but to avoid the haram. Someone told me that giving discounts to customers paying up front is impermissible. Is this true? If it is true, does it mean that it would be impermissible for me to take the discount?

    Jazakallahu khayran.

    • wa ‘alaykas-salaamu wa rahmatullaahi wa barakaatuh. There is nothing wrong with discounts on cash sales, so long as the price and product are both clear and agreed upon at the time of the sale. Furthermore, there is nothing wrong with paying in installments (not rent-to-own) at a price higher than the cash price offered. You might benefit from the 1428 Fiqh Classes in Toronto (Business Transactions): MP3s.

  5. As-Salaamu alaykum wa Rahmatullahi wa Barakatu,

    If someone signs an agreement to do something, and he/she wishes to do something else which contradicts the agreement, what options are available to get out of the agreement, if any?

    Jazakallahu khayran.

    • Wa ‘alaykas-salaam wa rahmatullaahi wa barakaatuh. If the agreement was permissible, he is required to fulfill it. “Fulfill all agreements, verily agreements will be asked about” [Meaning of Quran 17:34] The Prophet (sallallaahu ‘alayhe wa sallam) said (what means): “The Muslims are bound by their conditions (in their contracts).” [Sunan Abee Daawood, authentic] If you would like to get out of a permissible contract, come to an agreement with the other party. Perhaps they will be lenient and make a way out for you, giving up what they are due or part of it.

      If the contract was haraam (like a “rent-to-own” scheme), then the contract was invalid and ineffective legally from the beginning. However, you may be living under non-Muslim rule and you may have mistakenly entered an impermissible contract. Try to reach an agreement with the other party to cancel the agreement. In some cases, Muslims elect to repel the harm of going to jail by fulfilling an impermissible contract. Not that Islaam requires that, but it is done to repel serious harm. However, be warned: This concept is often abused and people give verdicts to themselves about the permissibility of fulfilling haraam contracts again and again, to avoid “harm”. Yet, they continue to return to the same kinds of contracts. There is a clear difference between an honest mistake one repents from and continual, insolent violations of Allaah’s Orders as a normal business practice, And Allaah knows best.

  6. I currently have a few “higher priced” items from a company that does “rent to own” furniture, electronics, etc. Is this permissible? ( more details: The items are offered at a cash price. If the cash price is not paid, fixed weekly installments are paid for a contracted term until a higher monetary amount is paid.) Does this count as an interest bearing loan?

    • In the negotiation stage, someone is allowed to offer you different ways of payment, either one cash payment or installments, and those prices are negotiable. He is allowed to say it is $100 cash right now, or $125 in installments. So long as the contract is clearly for one or the other, then the installment deal is permissible, even though you end up paying more than you could have paid in cash with one payment. This is regarding a pure installment agreement from a “rent-to-own” company, meaning there is no “rent-to-own” clause in the contract. And Allaah knows best.

  7. What is the ruling on car sellers advertising 0℅ interest rate for new cars. The dealing is anyway done through bank. The price of the car is fixed and they say this is the monthly installment. They say it is 0℅ interest. How to approach it.

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