Question
Can interest earned be used to pay off debt?
Answer
Alhamdulillah, wassalatu wassalamu ‘ala rasoolillah, wa ‘ala alihi wa sahbihi ajma‘in.
Earning interest (riba) is haram, and a Muslim should avoid placing his wealth where it accrues interest whenever possible. The Prophet ﷺ cursed the one who consumes riba, the one who pays it, the one who records it, and its witnesses, saying: “They are all the same.” (Muslim).
If a person has already received interest, that money does not belong to him. It cannot be used for personal benefit, nor to pay off personal debts, since that would be using haram wealth for oneself. Instead, scholars state that it must be disposed of for the sake of Allah, such as given to the poor, public utilities, or charitable causes — without the intention of reward, but only to clear oneself of haram wealth.
The correct path is:
- Avoid interest completely whenever possible.
- If interest is forced upon you (such as bank accounts where it cannot be avoided), then dispose of it by giving it away, not by using it for your own debt.
Final Ruling
It is not permissible to use earned interest to pay off one’s debts. Interest money must be disposed of in charity or public benefit, without expectation of reward. A Muslim should strive to avoid riba entirely.
And Allah knows best.