Short answer
Giving an item as security for a debt is halal: the Quran mentions it and the Prophet ﷺ pawned his own armour. But the lender may not use or profit from the pawned item, and a pawn shop or gold loan that charges interest on the loan is haram.
Rahn (pledge) is permitted and becomes binding on delivery of the item to the lender. The lender may not benefit from it, even with the owner's permission according to the stricter fatwa, since any benefit from a loan is riba. If the item is lost without negligence, the debt is reduced by the lesser of its value and the debt.
Other madhhabs
- Hanbali
- A lender holding a pledged riding or milking animal may ride or milk it in return for feeding it.
Explanation
The Quran says, when a debt is made and no scribe is found, "a security deposit should be taken" (2:283). The Prophet ﷺ pledged his armour with a Jewish trader for barley. Pledging is a way to give the lender confidence, not a way for him to earn.
The rules:
- The debt stays the same. The lender gets back exactly what he lent.
- No use of the item. If you pledge your car, gold or phone, the lender may not drive it, wear it or rent it out. That would be a benefit from the loan, which is riba.
- Care of the item: the lender keeps it safe. Storage costs may be charged at their real cost, not as a percentage of the loan.
- If you cannot pay: the item may be sold, with your permission or a court's, and the lender takes only what he is owed. Any surplus is yours.
- Nothing extra if you are late: no penalty interest.
Commercial pawn shops, payday pawn loans and bank gold loans almost always charge interest or a monthly fee tied to the loan amount. That is riba, so they are not allowed. Islamic gold-loan products that charge only a fixed safekeeping fee based on the item, not the loan, are permitted by some scholars; check with the bank's Shariah board.
The Hanbali school allows a lender to ride or milk a pledged animal in return for feeding it, based on a hadith in Bukhari. Hanafi jurists understand that hadith as referring to the owner. See Are loans haram? and Can Muslims do business with non-Muslims?
The evidence
Quran, Surah Al-Baqara 2:283
۞ وَإِن كُنتُمْ عَلَىٰ سَفَرٍۢ وَلَمْ تَجِدُوا۟ كَاتِبًۭا فَرِهَٰنٌۭ مَّقْبُوضَةٌۭ ۖ فَإِنْ أَمِنَ بَعْضُكُم بَعْضًۭا فَلْيُؤَدِّ ٱلَّذِى ٱؤْتُمِنَ أَمَٰنَتَهُۥ وَلْيَتَّقِ ٱللَّهَ رَبَّهُۥ ۗ وَلَا تَكْتُمُوا۟ ٱلشَّهَٰدَةَ ۚ وَمَن يَكْتُمْهَا فَإِنَّهُۥٓ ءَاثِمٌۭ قَلْبُهُۥ ۗ وَٱللَّهُ بِمَا تَعْمَلُونَ عَلِيمٌۭ ﴿٢٨٣﴾
And if you are on a journey and cannot find a scribe, then a security deposit [should be] taken. And if one of you entrusts another, then let him who is entrusted discharge his trust [faithfully] and let him fear Allah, his Lord. And do not conceal testimony, for whoever conceals it - his heart is indeed sinful, and Allah is Knowing of what you do.
Taking a pledge for a debt is allowed.
Sahih al-Bukhari 2068
Sahih... اشترى طعاما من يهودي إلى أجل ورهنه درعا من حديد ...
"He bought food from a Jew on credit and pledged an iron coat of armour with him."
The Prophet ﷺ himself pledged an item.
Sahih al-Bukhari 2511
Sahih... الرهن يركب بنفقته ويشرب لبن الدر إذا كان مرهونا ...
"A pledged animal may be ridden in return for its upkeep, and its milk drunk, while it is pledged."
The Hanbali evidence; Hanafi jurists apply it to the owner.
Where the ruling is recorded
- al-Hidaya, Kitab al-Rahn. Binding on delivery, no benefit to the lender, and liability on loss.
- Radd al-Muhtar (Ibn Abidin), Kitab al-Rahn, on the pledgee's use with permission. Why use with permission is still disliked or forbidden.
- al-Mughni (Ibn Qudama), Kitab al-Rahn. The Hanbali permission to ride or milk for upkeep.
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.