Interest in Islam:

interest (usury) is totally haram in Islam.It is of two kinds:

1.RibaNasi'a- taking interest on loaned money

2.RibaFadal- taking something of superior quality in exchange for giving less of the same kind of thing of poorer quality.

Tips to avoid interest:

Living in a capitalist society makes it difficult to completely avoid riba. However, this should not be used as an excuse to freely indulge in it. An obvious way to steer clear of this evil is to not take out a loan which involves paying riba. Other solutions include:

1.Opening up interest-free bank accounts.

2.Not entering into contracts which stipulate interest penalties, even though one intends to pay on time.

3.Making bill payments on time so as not incur a late penalty.

4.Meeting any conditions required to continue trading without the use of interest.

5.Borrowing money from family or friends where possible.

6.Dealing with Islamically compliant banks.

7.Renting if you cannot afford to buy a house without interest.

8.Accepting/organizing a goodly loan(al-qard al-hasanah), which is a loan by means of which one intends to show kindness to another, which does not involve taking interest

With regard to the interest that the bank has given you, do not return nor consume it. Rather, spend it on charitable causes, such as giving it to the poor, buying disposable items (like toilet paper) for Islamic centers and mosques, and helping debtors. However, do not expect reward for this

The most effective way to avoid interest and determine which transactions are permissible, is by consulting Islamic scholars and utilizing their knowledge.

Misconception of interest interest:

There is a common misconception amongst Muslims with regards to buying a first house using interest. Some claim that it is permissible, a "necessity". The fact that one can easily rent a house instead of buying, disproves this claim. If the theory were true, would that then mean that drinking the first bottle of alcohol is permissible, even though water is available? Or eating pork when there is a permissible substitute? While it may be easy to fool others into believing this,we must remember that:

"Allah knows all that you reveal and all that you conceal."Qur'an 5:99

"Hazrat Abu Huraira Radhiallaho Anhu has reported the saying of the Prophet Sallallahu Alayhi Wassallam that during his ascension (Mi'raaj), he noticed a group of men whose stomachs were bloated to the size of big rooms and their wanting to move from their positions was impossible. They would be crushed in a stampede by the friends of Fir'awn. The Prophet Sallallahu Alayhi Wassallam seeing their condition asked Hazrat Jibra'eel Alayhis Salaam about their identity. He was informed that they were the people who indulged in dealings of usury and interest."