The Ruling on Installment Sales and Tawarruq

Question:
Honorable Shaykh, a questioner sent a question saying: In our present time, installment sales have become widespread. Is an installment sale permissible if ownership is transferred upon full payment of the price when a commodity is purchased? And is that considered tawarruq (a commodity sale used to obtain cash)?

Answer:
A sale with a deferred price is permissible; this is a well-known matter from the Sunnah. The Messenger (peace and blessings be upon him) purchased on credit. A sale with a deferred price is permissible, and the deferred price may be higher than the cash price; there is nothing wrong with that, as it serves the interests of people. The matter of tawarruq is also a type of deferred sale; it falls under deferred sales. People resort to it out of need, on the condition that the commodity is in the possession of the seller before he contracts with the buyer; the commodity must be in his ownership. The saying of the Messenger (peace and blessings be upon him) is: , and on the condition that the buyer takes full possession of it and disposes of it, and the seller has no remaining connection to it. The buyer and the borrower take possession of it, then he sells it to someone other than the creditor, to someone other than its owner, and he benefits from its price. Yes.