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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
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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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