Quoting a poster on a site you linked.

If It sounds like interest and looks like interest it's interest !

Basically the "Islamic loan" is a for profit loan.

This is just a nice fancy way to twist the word "interest" around into something else.

Basically you still end up paying the bank a profit.

It's a scam.

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Personally, I think that if religious law - whether it is Islamic or any other religion - does not permit the payment of interest, then this arrangement sure seems fishy to me. Replacing the term "interest" with "profit" is patently ridiculous.

I am no Islamic scholar, but if I were, I would definitely say that these arrangements would fall outside of the law against paying interest. It's pure gimmickry.

If I were to guess, the prohibition against paying interest is designed to protect the devout Muslim from being harmed - in financial terms - from the dangers of usurious interest rates. Not a bad idea at all - even if you aren't a Muslim.

What the community should do, instead, is pool community resources to build family homes. Kind of like Habitat for Humanity. That way you skip out on the whole gimmickry with these silly "interest free" loans.

So if they are strictly following Muslim law then you should only have to pay for seven years then the debt is forgiven.

Islam is, by no means, a perfect system, but they do have some interesting and some beneficial points to make.

I actually agree with Islamic business loans as it causes the "lender" to look more closely to the business model or venture. They share in profits and they share in the loss as a normal business partnership would be.

As for the home loan, they do not loan the money. They are not allowed to loan money for profit, but they may choose (at a party's behest) to purchase a property. They then resell the property to the new owners and allow them to pay for it in installments.

There are generally no penalties for late payment either.

I wouldn't mind some of the Islamic banking ideas to float over here personally. When one does not seek information but rejects that which is different, they become bigoted and/or willfully ignorant.

Peace
KJ

Yeah right.

When they ask you to pay $1000 each month for a house that is only worth $800 each month, then that extra $200 is the ''interest'' part. It is a little lie to the little children.

Cabaret, you are exactly right. This Islamic loan, as described in the link given, is still 100% usury. It's pure gimmickry.

As I stated before, what really needs to happen is for the Islamic communities to pool their resources to build homes interest-free. Kind of like Habitat for Humanity - where homes are built for people that have put in so many hours of sweat equity building other people's homes. Rely on donations and private monies to fund the actual purchase of home building materials.

Another alternative would be communal living.

Homes prices are still quite inflated. Even with the crash in real estate prices, most people still require a mortgage in order to buy a home.