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Question
I would like to ask this question concerning my business, I usually sell cars and finance it by islamic law which mean i dont charge any interest,but to brotect my self i usually charge a late charge fee if they dont pay on time,please advice me is this halal or haram?
Answer
Praise be to Allah.This extra fee that you are charging for late payments
from the purchaser is the essence of ribaa. Hence when Allaah stated
that the ribaa which the people of the Jaahiliyyah used to charge when
the debtor delayed payment, when they would charge the debtor more in
return for a respite, was forbidden, He commanded that the debtor should
be given a respite without further charges being made. Allaah said (interpretation
of the meaning):
“And if the debtor is in a hard time (has no money),
then grant him time till it is easy for him to repay; but if you remit
it by way of charity, that is better for you if you did but know” [al-Baqarah
2:280]
And Allaah knows best.
Source: IslamQA (Sheikh Muhammed Salih Al-Munajjid)