Is it permissible to rent property in order to give it as collateral for a loan?
Question

                I needed to take a loan from the bank, and the bank asked me to give a property as collateral. Unfortunately I do not have any property, so I consulted a friend, and he suggested the following to me: he would give me his property so that I could give it to the bank (as collateral), in return for interest that I would pay to my friend, namely ten percent of the value of the loan, to be paid annually until I pay off the loan. Is that halaal or haraam?
Praise be to Allah.
	What appears to 
	be the case is that there is nothing wrong with this transaction, if it is 
	done by way of renting, in the sense that you rent the property from your 
	friend, in return for a known amount of money to be paid annually or 
	according to whatever is agreed upon, then you give it as collateral for 
	your loan with the bank.

	Shaykh Mansoor 
	al-Bahooti said:

	The one who 
	gives something as collateral must own it, even if he only owns its usage 
	and not the item itself, such as if he rents something in order to give it 
	as collateral, or he owns the right to use an item, such as if he borrows it 
	to give it as collateral, and that should be with the consent of the owner 
	in both cases. In that case it is valid to give it as collateral even if the 
	debtor does not tell them – namely the landlord or the lender – the amount 
	of the debt for which it is serving as collateral. But the debtor should 
	tell the landlord or the lender what he is giving it as collateral for, and 
	the length of time for which he is giving it as collateral, so that there 
	will be no ambiguity or deceit.

	End quote from
	Kashshaaf al-Qinaa‘ ‘an Matn al-Iqnaa‘ (8/154)

	We put this 
	question to our shaykh, ‘Abd ar-Rahmaan al-Barraak (may Allah preserve him), 
	and he said:

	It is 
	permissible so long as it is done by way of rental, that is, you rent your 
	friend’s land during the collateral period.

	And Allah knows 
	best.