Is it permissible to pay interest with interest?
The person sold their property with the intention of purchasing another property, the purchased property was part of a sequestrated estate and the purchaser was unwittingly responsible for a small occupational interest at 11% p.a until the full amount was paid.
So can the interest money gained from an interest bearing account be used to settle the interest requested.
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
In terms of Sharīah, it is Harām (impermissible) to take interest or to give interest. In the event one was involved in dealing with interest and received interest money, the interest money must be returned to its original owner (the one from whom it was received). If it is not possible to return this money back to its original owner, then one must dispose of such money by giving it away in charity.
Hence, if one is an account holder with a bank which accrues interest, and he owes the same bank interest due to taking out an interest bearing loan (although taking out an interest bearing loan is totally impermissible) he may dispose of the interest received from the bank by paying it towards the interest he owes to the same bank. This is because he is giving back the interest received to its original owner (the bank). However, in the situation stated in the query, it is impermissible to use the interest received from the bank to pay interest oweable to a property seller. Such interest must be disposed of by giving it in charity.
And Allah Ta’āla Knows Best
Checked and Approved by,
Mufti Ebrahim Desai.
 حَيْثُ قَالَ لِأَنَّهُ كَالْمَغْصُوبِ وَقَالَ فِي النِّهَايَةِ: قَالَ بَعْضُ مَشَايِخِنَا: كَسْبُ الْمُغَنِّيَةِ كَالْمَغْصُوبِ لَمْ يَحِلَّ أَخْذُهُ، وَعَلَى هَذَا قَالُوا لَوْ مَاتَ الرَّجُلُ وَكَسْبُهُ مِنْ بَيْعِ الْبَاذَقِ أَوْ الظُّلْمِ أَوْ أَخْذِ الرِّشْوَةِ يَتَوَرَّعُ الْوَرَثَةُ، وَلَا يَأْخُذُونَ مِنْهُ شَيْئًا وَهُوَ أَوْلَى بِهِمْ وَيَرُدُّونَهَا عَلَى أَرْبَابِهَا إنْ عَرَفُوهُمْ، وَإِلَّا تَصَدَّقُوا بِهَا لِأَنَّ سَبِيلَ الْكَسْبِ الْخَبِيثِ التَّصَدُّقُ إذَا تَعَذَّرَ الرَّدُّ عَلَى صَاحِبِهِ اهـ (رد المحتار، ج 6، ص 385، سعيد)
كتاب الفتاوى، ج 5، ص 318، زمزم