Question: I am interested in the difference between interest on a loan from a bank or company versus the issue of usury. My understanding is that usury is excessive interest - and a low interest on a loan is legitimate. Is there Koranic support for this interpretation? Thank you for your time on this issue.
According to Qur’an, every type of loan that is given to provide income is called usury; and the provided income, that is interest, is also usury whatever the ratio or amount of income is.
In the 275th verse of the Surah Al-Baqara it is commanded that usury is forbidden (haram). In the 278th verse of the very same surah, it is commanded that the amount to be specified as interest be left to the debtor, whatever the amount is. In the 279th verse it is commanded to the creditor that he receive only the capital he used to own; and the rest of income is usury. Therefore, there is no evidence for explanations regarding the amount of interest.
Those who devour interest do not rise except as rises one whom Satan has smitten with insanity. That is because they say: ‘Trade also is like interest;’ whereas Allah has permitted trade and forbidden usury. So he to whom an admonition comes from his Lord and he desists, then will that which he received in the past be his; and his affair is with Allah. And those who revert to it, they are the inmates of the Fire; therein shall they abide. (Al-Baqara/ The Cow 2/275)
O you who believe! fear Allah and relinquish what remains of interest, if you are believers.
But if you do it not, then beware of war from Allah and His Messenger; and if you repent, then you shall have your original sums; thus you shall not wrong, nor shall you be wronged. (Al-Baqara/ The Cow 2/278-279)