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How Non-interest Financial Institutions Work - Business - Nairaland

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How Non-interest Financial Institutions Work by allthingsgood: 2:08pm On Mar 04, 2019
If you ever wondered why Islamic banks thrive despite they dont collect any interest on the loans they give out, Below is an explanation



I've taken loans from Islamic and non-Islamic banks. They all make money, but differently.

Let's say you want to buy a car for $10,000, over 5 years.

Non-Islamic bank
The bank says: $10,000 compounded on a Monthly basis over the course of 5 years at a 4% interest rate would be worth: $12,210. They tell you let's make the monthly payment $200.

They calculate the interest every month. Your first payment would be fully interest, your last one would have no interest in it.

During the loan you can:
Delay a payment (only interest for that is added to the loan, the 5 years increases)
Take more money on the same loan (Refinance)
Pay partially or fully.
During the loan the bank can:
Increase the interest rate (in some places, without telling you, and you keep paying the same $200 monthly but the 5 years increases)

If the rate increases, or any payment is delayed you will pay more than $12,210.

The loan is for $10,000 with interest payments monthly. You don't know if it will finish on the exact date.


Islamic bank
The bank says I will buy the car for $10,000 , would you buy it for $15,000? (I say 15 for simpler calculations, it's usually just a little higher than a non-Islamic bank). We don't call it interest, it's profit.

If you say yes they will buy it. You still have the option to refuse buying it from the bank.

The $15,000 will be split into 60 payments of $250.

During the loan you can't:
Delay a payment (you have to pay it)
Take more money on the same loan (Refinance), you can take a new loan.
Pay partially.
During the loan the bank can:
Force you to pay a payment.

If you fully pay an Islamic loan before it's completion, most Islamic banks would pay you an "early repayment reward", which would reduce their profit.

The loan is for $15,000 with NO interest payments. You know the exact date when it will finish.




https://www.quora.com/How-do-Islamic-banks-make-money-if-they-cant-charge-interest-because-of-sharia

Re: How Non-interest Financial Institutions Work by Nobody: 11:12pm On Mar 06, 2019
Shadowprimezero
Bro what’s up with the misleading captions you give most of your redit posts ? Is it intentional because I find it quite hilarious that people believe things like “omega unit”... just wondering

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