Is there any Sharia impediment for merchants to pay off outstanding bank loans by purchasing a car for the debtor equal to the value of the financing, on condition that the debtor sells it and pays off his debt, then applies for new financing to pay the merchant the value of the car plus interest, and the debtor keeps the remaining amount from the new financing?
Were the debtor to engage in tawarruq, which is purchasing a commodity on credit and then selling it for cash to someone other than the original seller at a lower price than he bought it for, this would be preferable, and it is the view of the majority of scholars. However, for the merchant to stipulate that the debtor sell the car and apply for new financing to pay off the value, this invalidates the contract. And if the merchant is the one who will buy the car again, then this is an unlawful inah sale.
Summarized from the full answer at Ftawy · reviewed Sep 2, 2026
Read the full answer on Ftawyhttps://ftawy.com/en/questions/103980