Short answer
A normal debt consolidation loan is a new interest-bearing loan, so it is not halal in itself. Halal routes exist: an interest-free loan from family or a qard hasan fund, Islamic refinancing, or a debt management plan where creditors freeze interest. If you are already trapped in interest, ask a mufti whether moving to a cheaper loan is allowed in your case.
Taking a new interest loan to pay off old debts is haram in principle, because the new loan carries riba. Many Hanafi muftis allow a person already in interest debt, with no halal way out, to switch to an arrangement that clearly lowers the total interest he pays, as the lesser of two harms. Whether this applies to you is a personal ruling for a mufti.
The four schools agree on this.
Explanation
Debt consolidation means rolling several debts, often credit cards, into one loan with a single payment. In most cases the new loan charges interest, so on its own terms it is a riba contract, and both the one who pays riba and the one who takes it are cursed in the hadith.
Halal ways to get on top of debt:
- Qard hasan. An interest-free loan from family, friends or a masjid or community fund to clear the interest-bearing debts.
- A debt management plan. A free debt charity negotiates with your creditors to freeze interest and accept affordable payments. You are not taking a new interest loan.
- Islamic refinancing through a provider with a Shariah board, where one exists for your situation.
- Selling assets and cutting costs, then paying the highest-interest debt first.
When none of these work and you are already paying heavy interest, some muftis allow moving to a loan that clearly lowers the total interest you will pay, on the principle that the lesser of two harms is chosen. This is not a general permission: the details, the numbers and your options matter, so ask a mufti before signing.
Allah tells creditors to give time to a debtor in hardship (2:280), and the Prophet ﷺ used to seek refuge in Allah from sin and from heavy debt. Make that dua part of your plan: see Dua for debt relief. Avoid new debt for things you can live without, and see Is it haram to pay interest? for what to do about loans you already have.
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Baqara 2:280
وَإِن كَانَ ذُو عُسْرَةٍۢ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍۢ ۚ وَأَن تَصَدَّقُوا۟ خَيْرٌۭ لَّكُمْ ۖ إِن كُنتُمْ تَعْلَمُونَ ﴿٢٨٠﴾
And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, then it is better for you, if you only knew.
Creditors are told to give struggling debtors time, which debt plans seek.
Quran, Surah Al-Baqara 2:275
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَٰٓئِكَ أَصْحَٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَٰلِدُونَ ﴿٢٧٥﴾
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.
A consolidation loan with interest is still riba.
Sahih al-Bukhari 832
Sahih... اللهم إني أعوذ بك من المأثم والمغرم ...
"O Allah, I seek refuge in You from sin and from heavy debt."
The Prophet ﷺ treated heavy debt as a harm to seek protection from.
Sahih Muslim 1598
Sahih... آكل الربا وموكله وكاتبه وشاهديه ...
"He cursed the one who consumes riba, the one who pays it, the one who writes it and its two witnesses."
Taking a new interest loan is taking part in riba.
Where the ruling is recorded
- al-Ashbah wa al-Nazair (Ibn Nujaym), The fifth principle: harm is removed, and the lesser of two harms is chosen. Basis for reducing an existing harm when it cannot be removed entirely.
- Radd al-Muhtar (Ibn Abidin), Kitab al-Buyu', section on loans (fasl fi al-qard). Every loan that brings the lender a stipulated benefit is riba.
Checked by our team. For a more accurate answer to your own situation, consult a scholar. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.