The Islamic Fiqh Academy regarding selling by instalments has stated that:

After reviewing the research on this topic we can say the following:

1. It is permissible that the delayed price exceeds the actual price of an object. It is also permissible to mention the price of goods in case of full payment and its price in case of delayed payment. However, the sale is not valid until the two parties concerned have reached the conclusion whether payment will be in full or installments.

2. It is not permissible, in case of sale with delayed payment, to determine the interest gained in return for a delayed payment, separating it from the present price.

3. If the debtor cannot pay the installment at the predetermined time, it is not allowed to impose extra money on him for this delay as this involves Riba (accumulative interest).

4. The person in debt is not allowed to delay paying the installment at its due time. However, it is prohibited to impose any extra money on him because of the delay.

5. It is allowed for a lender in this case to stipulate that the installments be due before their time in case the debtor delays paying some of them, so long as this stipulation is included in the contract.

6. The company has no rights over the item sold after delivering it to the buyer. However, they are allowed to stipulate that the sold object be put in their custody so as to be sure of receiving the remaining installments.

Moreover, Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, adds: “If the purchase contract mentions a cash price, and interest additive and then installment price, the contract has a grave error from the Shari`ah point of view, because it amounts to selling at two prices, one cash, and one as installment. About this kind of purchase/sale contract, the Prophet (peace and blessings be upon him) stated that the lowest price applies or the transaction is Riba-based. Riba is prohibited being one of the worst sins a Muslim may ever commit.
If the contract only mentions one price or the installment sale (even if this price is calculated on the basis of cash-price + interest) the contract is then valid because the Shar`iah recognizes and allows that the price of the deferred payment sale may be higher than cash sale.

Now, if the contract is made according to the first paragraph, the remedy is to pay all remaining installment as soon as possible and negotiate with the seller to eliminate or at least to reduce as much as possible of the contractual interest and make repentance and istighfar (seeking Allah’s forgiveness) with a pledge inside one’s own conscience to avoid entering into any prohibited transaction in the future. Remember that one must check on the permissibility of a transaction before starting it.”

It has become clear from the above that sale by installments is permissible as long as the above-mentioned guidelines are observed.