Sheikh `Abdus-Sattaar Fathallah As-Sa`eed, Professor of Qur’an Exegesis at Al-Azhar University, states the following: “Given a well-established juristic rule, stating that: “any loan that entails interest is Riba”, one must not undertake any deal involving Riba, which is strictly forbidden in Islam. The interest charged on a bank loan is pure Riba.
This means if a house is purchased by a bank and then paid for in instalments, then such a deal is permissible even if it entails payment of what amounts to the cost and interest, or more than that, for a hire-purchase deal is permissible. This is according to the majority of scholars.
However, if one takes out a bank loan which entails interest, then this is forbidden although some scholars maintain that a Muslim is allowed to do so with non-Muslims in non-Muslim countries as long as that involves a benefit, and not a loss, for the Muslim.”