Assalamu alaykum,
sorry if this question has been asked before. Mufti, I want to buy a few home appliances and the seller is offering the opportunity to pay using Klarna…
so i pay in 3 instalments - interest free https://www.klarna.com/uk/terms-and-conditions/
is this halal ?
May Allah reward you for your time
Wasalam
May Allah bless you.
From the quick look I had, there is interest repayment involved. Thus, it is not permissible.
If I have missed something or you believe there is an interest free option in this offer, then let me know so I can have a read through it inshaAllah.
And Allah knows best!
I understood this to be similar to any installment plan and similar to a murabaha transaction of cost + markup.
There is one invalid condition that interest will be charged if the buyer does not pay. And if the buyer is certain that they’ll make payments, then it should be ok along the same lines of credit card purchase with full payment every month.
Regards
ZubairLK
p.s. gtg. please excuse the grammer
May Allah reward you for prompt response, my understanding is that the 3 monthly payments are without interest, which is my intention to pay in full before any interest payment is due. but like with everything the small print is what matters.
this my understanding but I wanted to check first. on the face of it ,it looks no interest for 3 months and you can pay even before the three months is up… interest is charged if you don’t pay by three months
Yes if there is a 3 months interest free options then it is fine to enter the agreement. However, many scholars would not agree with this. This is due to the fact that agreeing to pay interest in a contract is not permissible
And Allah knows best!
I understand that this question was asked quite a while ago, however I wanted to clarify that the Klarna Pay in 3 instalments option has no mention of interest or late fees in its terms and conditions at all- these can be viewed here:
Terms and Conditions (klarna.com)
If a buyer fails to make the repayments they are prevented from using the service again and eventually a debt collection agency will be used to collect the debt.
This may therefore be permissible. It must be said that this is different to the Klarna options available to pay over a longer period of time (available for bigger purchases)- these latter contracts do contain late fees in their terms and conditions.
And Allah knows best
JzkAllahkher
Nawaaz
Wa alaykum salaam
Klarna is not Shariah compliant to use. Their model is based on Hawalah and charge fees for Hawalah which is not permitted according to majority of scholars.
Assalamu alaykum Mufti
JzkAllahkher for your response. I was not previously aware of Hawalah and so I researched this. From what I understand, Klarna transfers the debt from the original debtor (the customer in this case) to themselves. By charging a fee for doing this, do you mean that they charge a fee to the retailer, and therefore why it is not permissible for us to use? The Klarna website states that retailers pay a transaction fee, in a similar way that retailers pay a fee to credit and debit card providers to process a transaction. Is the Klarna Hawalah model different to debit/credit card models as card providers do not assume responsibility for the debt, and therefore the “transaction fee” claimed by Klarna is in reality a ‘debt transfer fee’?
https://www.klarna.com/uk/blog/the-questions-on-your-lips-how-does-klarna-make-money/
JzkAllahkher for your help on understanding this better
Nawaaz
Wa alaykum salaam,
It’s not clear to me how they compare to credit card or debit cards. If fees are paid to POS systems or intermediaries in the card transactions, that’s different to Klarna profiting from the fees charged to merchants.
JzkAllahkher Mufti, much appreciated. I will avoid them in future insha Allah.
@Mufti_Faraz_Adam @Mufti_Billal
Assalaamu alaykum wa rahmatullahi wa barakatuh Muftis,
Does the same ruling apply to PayPal Pay in 3?
It seems like it is given at no cost to the retailer, and they pay standard transaction fees when a customer chooses to use it
I understand that Klarna makes their money from fees which is haram in a Hawalah transaction, but it seems like PayPal don’t make a profit from Pay in 3, as the transaction fees are seemingly the same without it
More info on PayPal Pay in 3 from a business perspective:
More info on PayPal merchant fees:
Salaam @Mufti_Faraz_Adam can you please elaborate on why hawala is haram?
JzkAllahkher for adding to this Qasim. @Mufti_Billal @Mufti_Faraz_Adam could you please share your thoughts on whether Paypal Pay in 3 would be permissible to use as it doesn’t have any fees for the user or the business? If so, this may make it unique among BNPL providers as permissible for us to use.
JzkAllahkher
Here’s what I thought, feedback welcome.
Klarna works this way:
The merchant pays Klarna. Then Klarna pays the merchant the full amount then takes it as a responsibility to chase the customer for the full money. So Klarna is paid, and provides a credit and the chasing of the customer. Because a payment for credit is riba, Klarna is certainly haram. If we’re a customer and not a merchant, so that we’re indifferent about the credit, it’s still haram, because how Klarna works is well-known, and it’s forbidden to witness riba or to encourage it, the reason to avoid it remains.
The other view of Klarna is that they are being paid and they allow a delayed payment, the same ruling applies.
I found a fatwa regarding profiting from guarantorship: It is not permissible to accept money in return for acting as guarantor for someone - Islam Question & Answer
As for PayPal Pay in 3, they charge no more for this kind of credit in comparison to an instant payment. If we consider it intention-wise, it’s halal since no charge is taken for installments, but if we consider that they provide installment-payments and they charge a fee, it’s haram. Besides, the reason they encourage installments is to increase trade volume hence the collection of fees, which seems very suspicious to me. Hence, it seems better to me to avoid PayPal Pay in 3. Allah knows best and please let me know if I’ve made a mistake.
May Allah bless you.
Paypal Pay in 3 is interest free as far as I am aware. As long as someone is confident that they can repay before the interest become due, then I do not see any issues with it.
When someone agrees to pay the interest in the case of late payment, then this can be a shariah issue. Hence, I am stressing on the fact that one should only use BNPL when there is a need for it, and when you are able to manage your money correctly.
And Allah knows best!