According to the majority of Muslim jurists, it is totally forbidden to obtain any loan which entails interest. However, some contemporary Muslim jurists state that it is permissible to get an interest-based loan in case of extreme necessity. However, such necessity is to be judged according to the circumstances that warrant it.
Dr. Monzer Kahf, a prominent Muslim economist and counselor, said:
Riba is forbidden in the Qur’an and in the Sunnah. It refers to any conditional or customary increment in a loan contract. Although the Qur’an in verse 2:275 talks about taking Riba you should note that verses 2:278-279 talks about usurious deals. Obviously dealing in Riba covers both parties as well as other persons involved such as the writer, the witnesses. This verse alerts to a war waged by Allah and His Messenger (peace and blessings be upon him) on those who do not quit dealing in Riba. It also defines the meaning of quitting Riba, i.e. taking back only your principal without addition or reduction.
That is why the Prophet (peace and blessings be upon him) mentions that “the Wrath of Allah is on the taker, the giver, the writer and the two witnesses of Riba.”
Obviously, any ruling is subject to an exception, in case of necessity; that is when life, religion, mind, posterity and property are threatened by destruction or heavy damage. In this case a ruling is relaxed to protect any of these things.
Applying the rule of necessity here, we can notice that there is no necessity in taking Riba or writing or being a witness to its contract. In other words, a necessity, if it happens, applies only to giving or paying Riba.
To claim that it is necessary to take interest-based loans from banks cannot be justified
by real life. What supports this argument is also the fact that many people survive without taking interest-based loans or getting involved in usurious deals. In fact, banks do not give loans to those who desperately need money for their survival or for the protection of any of the five things mentioned above.
As it is usually said, banks give you the umbrella only on clear days but when it is rainy, banks tend to withdraw their umbrellas.
We are in an age in which Islamic banks and Islamic financial cooperatives exist in many countries in the world. This does not mean that the case of necessity ceases to apply in our time. For those who live in areas that do not have Islamic banks, resorting to loans from conventional banks, only for necessity and similar cases becomes permissible.”