"Muslim-friendly" loans: Is this a good way to lock in an interest rate?

[Solly]

The NAB is planning to introduce "Muslim-friendly" loans that do not charge interest.

Because of....

"the Islamic ban on usury the mortgage often works by the bank buying the property, then selling it to the customer at a profit, with the customer then repaying the entire sum in instalments.

In this way the profit margin is built in from the start. It also has the advantage of making the loan immune from future interest rate rises."

See the article here from Nick Gardner and Warner Russell from the Sunday Telegraph

http://www.news.com.au/business/money/story/0,28323,25632782-14327,00.html


These loans are available to non-Muslims as well.

Is this a good way to lock in an interest rate ?
Can you see any downside ?
Are there any advantages?

 

[Tink]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

Is this for real - or a media beat up..

They just love stirring that pot

 

[bluelabel]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

and they reckon bashing indian students is racist.

:bier:

blue

 

[Tink]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

They just love stirring that pot

I was talking about the journalists...

 

[ROE]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

nothing news this stuff been around for decades.
don't think you getting a better deal, they structure it so you effectively pay the same amount of interest.

Interest in another term like fees, transaction cost for them

 

[MACCA350]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

How about we start a religion that ban's anyone making a profit from us

Can someone explain the reason behind why Sharia law prohibits interest being paid or charged?

cheers

 

[Tink]

How journalists are allowed to get away with this BS is beyond me..

 

[MACCA350]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

nothing news this stuff been around for decades.
don't think you getting a better deal, they structure it so you effectively pay the same amount of interest.

Interest in another term like fees, transaction cost for them

Doesn't this defeat the purpose of their law, I mean what's the point of a ban on paying/charging interest if you can get around it by simply calling it something else

Not trying to belittle anyone's religion here, just trying to understand

cheers

 

[Tink]

Macca is old news redone by the journalists just to get you biting... its worked

They just added Muslim on it for abit more effect..

 

[MACCA350]

Macca is old news redone by the journalists just to get you biting... its worked

They just added Muslim on it for abit more effect..

Fair enough, but I am interested in the reasons for behind interest being banned in Sharia law. I've never heard about it before and am simply curious.

cheers

 

[jono1887]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

How about we start a religion that ban's anyone making a profit from us

Can someone explain the reason behind why Sharia law prohibits interest being paid or charged?

cheers

Their religion is against both paying interest and being paid interest (they cant open bank accounts that pay them interest).... The law originates from the Christian (old testament), Jewish bible which so happens to make part of the Muslim Quaran as well. The law goes about like this... 'don't charge interest to your own brothers...' something along those lines which was intended to keep communities together.

Now when credit first emerged in 1500s. The Christians went through the same phase that the Muslims are going through now. They refused to give loans with interest or get interest on their money. However, the clever money making Jews read a technicality into the law which stated that you couldn't charge interest to your 'brother'... hence, lending to other races other than fellow Jews was perfectly fine

time goes on, and the Christians get over it as well after further improvements and changes to the credit system, more technicalities ect.

Now the Muslims are the only ones left whingeing about paying/receiving interest as they still tend to take those laws literally just like the ones to "kill the infidels" (essentially all non Muslims)

 

[jono1887]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

Doesn't this defeat the purpose of their law, I mean what's the point of a ban on paying/charging interest if you can get around it by simply calling it something else

Not trying to belittle anyone's religion here, just trying to understand

cheers

It does in our eyes... but its essentially the same thing that happened 500 years ago, its all about finding technicalities that stops you from 'going to hell' so to say. People want to have clear conscious' when it comes to religion and by having technicalities that gets you through the problem they go home felling better about what their doing.

But I do think those texts should be read IN CONTEXT and what the situation was at that time... its pointless following them literally when its no longer relevant.

 

[Julia]

nothing news this stuff been around for decades.
don't think you getting a better deal, they structure it so you effectively pay the same amount of interest.

Interest in another term like fees, transaction cost for them

How journalists are allowed to get away with this BS is beyond me..

It's not BS at all. ROE is right. It's just a new way of marketing loans by the bank. The journalists are simply reporting it.

 

[Tink]

Yes Roe is right -- its been in for decades...

So why add Muslim?
I doubt they have even said a word...

Journalists are good at stirring the pot - stir up the masses

 

[MACCA350]

Re: "Muslim-friendly" loans. Is this a good way to lock in an interest rate ?

The law goes about like this... 'don't charge interest to your own brothers...' something along those lines which was intended to keep communities together.

That makes sense.
It always amuses me how people get around a religious belief using a technicality, I mean the intention is still there.......just one of the many reasons I became an Atheist (I was brought up as a Seventh Day Adventist, a Christian denomination, and left ASAP)

cheers

 

[ROE]

Fair enough, but I am interested in the reasons for behind interest being banned in Sharia law. I've never heard about it before and am simply curious.

cheers

Christian used to have the same law, basically it's a sin and you rott in hell if you charge people interest.

It took a clever Jew to get around it again he called it transaction cost and fees

 

[BradK]

Pretty common in the UK - not sure how it works though.

I'd swap interest for profit sharing any day... unless it was an investment property...

Ummmm.... why not give us a choice?

Besides, I heard the loans was only available up to $1000 anyway?? So, not really mortgages covered. Yet.

Brad

 

[MACCA350]

Christian used to have the same law, basically it's a sin and you rott in hell if you charge people interest.

It took a clever Jew to get around it again he called it transaction cost and fees

This Christian law must be lost in history, I'd say most current Christians would have no idea it ever existed, I know I never knew it did after 18 years of being an SDA.

I do remember when I was younger(under 10yo) we were banned from any activity that was purely for entertainment between Fri and Sat sunset. It was part of the "no self gratification(or something like that) on the Sabbath" as you were meant to glorify God, not yourself, on that day............this meant no swimming etc. By the time I was a teenager my parents became more liberal and some such entertainment were allowed.

cheers

 

[disarray]

by adding the total interest to the principal at the outset of the loan you have no opportunity to decrease the amount you pay back through extra repayments. the banks must love it.

 

[jono1887]

by adding the total interest to the principal at the outset of the loan you have no opportunity to decrease the amount you pay back through extra repayments. the banks must love it.

not if the overnight cash rate increase several percent over the life of a 30 year loan... you have to take that into account. Say its calculated at 8% over the mortgage... if RBA rates go to 10%, the bank would be borrowing their money at 10% and only getting 8% back (so to speak) - i know thats now exactly how it works but the bank would be loosing out if that was to happen