Do Your Homework and Search for the Right Used Auto Loan

Finding used car loans can be different than obtaining loans for new cars. Apart from credit, factors include the age of the car and its current market value. A number of large banks will not provide a used auto loan for cars that are over five years. They will, however, sometimes hand out loans that will cover the cost of inexpensive older models. Loans of this nature may not be secured and can carry a higher interest rate.

There are companies out there selling second hand cars which are under contract with few lenders that regularly provide used car loans. Interest rates here may not often be the best. It is recommended that you apply for an online used auto loan to find the best rate. Always approach this with caution and check on the status of the lender prior to applying. If you belong to a credit union, you may find better than average rates for a used auto loan, and this may be a path worth pursuing.

If you are lucky enough, it is possible to get a used auto loan for a prime interest rate, especially online and if your credit score is excellent. An excellent credit score can be quantified as 680 to 700 or higher and have established a way of paying back loans. Those with credit problems can still get used car loans but will have to do a little more searching to find one. There are some companies that will only work with people with good to excellent credit scores. If your credit is not good and you need to get a car, look for a bad credit used auto loan. You may have to pay a much higher interest rate though, regardless of whether the car is used or brand new.

Pay close attention to how lenders look at the price of the car you are thinking of. A car has to be reasonably priced and fall into the Kelley Blue Book range for age, mileage, and condition. Loans may not be granted if the car you choose exceeds this range. There are some exceptions to this as some lenders will lend out extra money to pay for service contracts or extended warranties.

When shopping around for a second hand automobile, you really should take time comparing the available online rates before agreeing to a used car loan with car dealers that specialize in handing bad credit loans. There are times when the interest rates they offer can be extremely high and not as competitive as what else is out there. Shopping for a deal that makes sense is the smart thing to do, even with a poor credit score.

To avoid a negative credit score, shop actively without applying for any loan and ask one or two lenders that have good rates and terms for used auto loan pre-approval. In a pre-approval, a lender will provide you with paperwork that will indicate how much you will be given, and the loan interest rate and terms.

Posted in Uncategorized | Comments Off

Bad Credit and Car Loans – How You Can Find an Auto Loan With a Poor Credit History

Bad credit and auto loans are not terms that go well together. Cars and trucks are very pricey, and few people pay out cash for them. Many people obtain financing in order to pay for their vehicle over a period of time. Regrettably, if you have bad credit, car and truck loans may be difficult to get.

If you live in the U.S., it’s tough to make do without having a motor vehicle. Unlike numerous European countries, the U.S. has very few metropolitan areas with comprehensive mass transit. That ensures that most people must purchase a vehicle as a way to get to work. If you’ve got no motor vehicle and a bad credit score, you’ve got a dilemma on your hands. Many loan providers are not interested in lending money to people who have an unhealthy reputation for paying their debts. What can you do if you find yourself in this predicament?

Here are a few ideas which may help you get a car loan if you have poor credit:

Speak with smaller loan providers. In lieu of speaking with the bank from the big national chain, talk to a loan consultant from a local bank. Often, small local businesses are more interested in assisting individuals with loans than big national banks, which are apt to have their lending standards developed by their corporate headquarters.

Talk to a credit union. A few credit unions have loan requirements which are less strict than those of banks. If you possess an account at a credit union, especially if you have an account through your place of work, you may be able to arrange to acquire a loan. It helps if you’ve been working for not less than twelve months; lenders tend to look more favorably upon people with steady work histories.

Lowering the size of the loan may help. The larger your down payment, the lower the amount of cash you will need to acquire. The smaller the loan amount, the more likely a loan provider will be to assist you when you have a bad credit score.

Find a dealer which will finance for you. Some car dealers can provide financing; you merely make payment right to the dealership. A lot of these dealerships will demand payments every week, but if that is your only choice, you will have to live with it.the prevailing

Find a loan provider who concentrates on assisting individuals with bad credit car loans. In the current downturn in the economy, a lot of people are having financial trouble. You can find a lot more loan companies who are prepared to assist people who have financial trouble than there were not long ago. These kinds of loan companies specialize in assisting people who have bad or poor credit. You won’t locate these kinds of loan providers just anywhere, but a simple Web search should yield a few of them.

Bad credit and auto loans aren’t a good mix, but having one does not mean you can’t have the other. You will need to do a little more research to find a lender who can assist you, but there are many who will. And once you locate one and pay off the borrowed funds, you will have the advantages of having a vehicle and having a better credit score.

Posted in Uncategorized | Comments Off

Credit Union Auto Loans – 7 Keys to a First Time Buyer’s Approval

Credit union auto loans are great for first time buyers in need of money for an upcoming vehicle purchase. In fact, credit unions are usually the best source, because they will typically offer rates and terms to first time buyers that can’t be found with other auto lenders.

Unfortunately, not all first time buyers will qualify.

Here are 7 key factors that credit unions consider in their auto loan approval process:

7) Your Credit Rating

There are essentially four credit situations a first time buyer will be in:

Toughest – i) No credit with collections, i.e. medical, cell phone, utility, judgements, tax liens, etc.

Tough – ii) Absolutely zero credit, no good and no bad.

Easier – iii) Limited credit with short history. You might have a small credit card(s) and/or under two years history.

Easy – iv) Long history, but no prior auto loans. You may have had auto loans in the past, but they are older and no longer show on your credit file.

6) Are You A Current Member

It’s not always necessary to be a member prior to applying for a credit union auto loan, but credit unions have been known to stretch a little for their existing members.

The longer you have been a member, the more money you have in your account and your monthly activity, i.e. regular monthly deposits, all may help when making a decision on a border line application.

5) Your Total Down Payment

Many first time buyers are able to get approved for a credit union auto loan with no money down, but the other factors on this list will be looked at more closely.

It will definitely help if you are able to show your commitment to the vehicle with a large down payment. Credit unions look at large down payments as glue. The more money you have invested up front, the more “stuck like glue” you will be to the vehicle and therefore, it will be that much harder for you to walk away from the vehicle in the future.

4) Your Employment Stability

Most credit unions will want to see a minimum of 12 months on the job, with 18 months being preferred. Often times they will consider how long you have been in the same line of work, if you have had multiple jobs over that time period.

3) Your Ability To Repay The Auto Loan

This is usually figured using a Payment To Income (PTI) ratio and a Debt To Income (DTI) ratio. In order to get approved for a credit union auto loan, most first time buyers will have to have a PTI equal to or less than 15-20 percent of your gross monthly income.

Your DTI takes into account all of your monthly bills, including your new auto loan payment, and will typically need to be equal to or less than 40-45 percent of your gross monthly income.

2) The Vehicles Age and Miles

Not all, but many credit union auto loan approvals will be affected by the vehicles age and miles. Most of the time they will be flexible on the age and not quite so restrictive, but many will not finance vehicles with over 100,000 miles.

If vehicles with 100,000 miles or greater are allowed, then they will often times want to finance for shorter terms, which in turn can impact your monthly payments.

1) The Total Amount Financed

The sky is certainly not the limit when it comes credit union auto loans for first time buyers. Most credit unions will cap the total amount financed at somewhere between 8,000 and 12,000 dollars.

Prior credit history will typically be the biggest factor in determining how much a credit union will loan you and this total amount financed range is usually reserved for customers just starting out with a limited credit history.

Summary

Not all of the factors above need to be met in order to get approved for a first time buyer auto loan, but the more the better. You can lack in one or more areas, but make up for it in another.

In my opinion, all first time buyers should consider a credit union auto loan as their first source for money when buying a vehicle. They typically offer the best rates and the best terms, while at the same time allowing you to establish a solid history with a lender you may do business with for many years to come.

Posted in Uncategorized | Comments Off

Bad Credit New Auto Loans

Financing is a touchy subject especially when it comes to buying a care or a house. There are a few ways however, to beat the auto dealer. Most auto dealers will try to sell you on the highest price that the vehicle is worth. Many times it is way more than what they purchased the vehicle for.

The first thing that you want to do is shop around for your own financing. Many of the times you can get a much better rate by going through a credit union or a local bank. By doing this you will be able to know exactly what you can afford. You will also know the term of the loan most are either 60 or 72 months. Once you have been approved you can go out shopping and have an upper hand over the dealer. This is because you know the amount you want to spend and you also, know what that monthly payment will be.

Before you go to the dealer you will want to know the car that you want. Look at prices on the internet and in the paper. Compare different dealers to see who has the best price to offer. This way when you go into the car lot you can tell them what you want and the price you are willing to pay. Remember you have a check that is good at any dealership that you find a vehicle that you want. Once you tell them that you already have your own financing they will do what ever it takes to earn your business. This is because they do not have to work with the banks to get you the best deal.

The main job of the dealer is to sell you and make a commission. If they do not have the car that you want they will try to sell you on something else that they have on their lot. Do not fall for this. You could end up settling for something that you really do not like or want. Then you are stuck with it for the next five to six years which is normally the term of most loans.

The best thing to do is to shop around go to different dealerships and price their cars. The best time to look is at the end of the month. This is because the dealerships get new cars in the beginning of the month and they are trying to get rid of the cars that they had. They also are trying to meet their quotes for the month and make up for any commission that they might not have gotten. So, for this reason they are more likely to try to make a deal to earn your business.

You also want to make sure that you have enough money to put down on a car to get you a lower payment. For every thousand dollars you put down you lower your car payment by 20 to 30 dollars. You will also wan to keep in mind that you will have to pay taxes and plate fees. All of this adds on to the price that you will be financing. The next thing you will need to get is a warranty any time you are buying a used car you have the potential to buy someone else’s problems. For this reason you will want to ask the dealer for a carfax report. This will tell you all the history of the car if it has ever been in an accident or if there has been any engine work done. This will let you know if the vehicle may have other potential problems.

To end up with a payment that you are happy with and a car that you want you will need to follow the previous suggestions. The goal is to for you to have what you want and can afford. Remember the dealer does not know your financial situation and what may seem like a great deal to them is just not for you.

Posted in Uncategorized | Comments Off

Facts on Bad Credit Military Auto Loans

Being in the military has certain advantages in the personal finance market, such as lower rates on car insurance, discounts at certain stores, as well as the ability to apply for military loans. These are personal finance instruments tailor-made for service men and women.

Not only may you get a good deal on a car because of being a service member, you may also qualify for an auto loan with lower interest rates, lower fees, and more comfortable repayment terms, even if your credit rating is somewhat lacking. A bad credit military auto loan can put you in the driving seat.

Guilty or Innocent

Bad credit happens, especially in the rough and tumble financial times in which we find ourselves. Many folks have taken some bad hits on their credit reports, either because of late payments, defaults, or even bankruptcy.

Or, maybe you just have not had a chance to establish yourself when it comes to using credit. Having no credit puts one into pretty much the same state as having bad credit. You have yet to prove yourself when it comes to using credit wisely.

Car Loans Are Available

In spite of the fact that you have a credit history that is not perfect or is just not existent, you can land a loan and you will not have to pay through the nose to get it. While bad credit auto loans are available to the general public, interest rates and fees are rather high because of the risk the lender is taking. Also, repayment terms might not be so comfortable.

With bad credit military auto loans, you will be paying interest fees that are higher than those for good credit borrowers, but you will find that military loans have better interest rates, lower fees, and more comfortable repayment terms than those for the bad credit general public. Shopping and scrutinizing are very important.

Traditional vs. Private Lenders

Traditional lenders such as banks and credit unions have tightened up their requirements for credit. Nowadays even good credit borrowers have a little trouble getting loans. Seeing this gap in the market has called forth some private lenders willing to take a risk with bad credit military auto loans. In fact, so many are out there now that you will be able to do some shopping to find the best bad credit auto loan to suit your financial situation.

Your best bet is to go shopping on the internet. Many lenders have set up shop there. Simply punch the key phrase into your browser: Bad Credit Military Auto Loans. You will be rewarded with the websites of many lenders willing to extend auto loans to you. You will even find brokers who will take your general information and compile a list of lenders most likely to approve your loan in light of your present financial situation. Since many will forgo a credit check, the turnaround time to get your loan approved could be as little as 24 hours.

Get That Car

Before you go shopping for a loan, you need to go shopping for a car. Be prepared to tell your lender the model and cost of the car you desire. If the lender is willing to cover you, you can walk onto the dealer lot with enough confidence to wrangle a good deal since your financing is pre-arranged.

Posted in Uncategorized | Comments Off

The Benefits Of Getting A Personal Loan

A personal loan is usually not secured. It means collateral does not need to be provided by you when you borrow. The loan is offered to you by the lender on the basis of your credit and qualifiers. You can easily get the approval of loan, if you have a good credit. A lower interest rate can also be offered to you. Visit a financial institution or search online to get a personal loan.

Here is a list of some of the benefits of such a loan.

Lower interest rate – If you have good credit, then personal loans with lower interest rates can be availed by you. Around 15% APR on a credit card balance is paid by the people with lower credit card balance. But if you have good credit, you have to pay only 6% APR. While making a big purchase, it is considered as a big difference.
Use for many purchases – Your cash can be used by you for making any purchase. A loan of this type can be used even for purchasing a vehicle, starting a business or renovating your house. Restrictions may be placed by other types of loans on the usage of fund. But the conditions of using a personal loan are flexible and can be used for any purchase.
Consolidate debt – High interest debt can be consolidated by using a personal loan. Several smaller debts with high interest such as credit cards and student loans can be paid off by using a larger loan. Money on interest can be saved if you consolidate your debt by using this loan. Your debt repayment plan can be managed in a better way by combing several loans in one place.
Smooth your cash flow – Your cash flow can be smoothened by using a personal loan. A personal line of credit can be got by you, by using your personal loans. You have to pay a low interest rate in this alternate way of use. An emergency fund doesn’t need to be raised for future. The borrowed amount can be repaid by accessing your line of credit.
Boost your credit score – Your credit score is counted depending on your different types of accounts. One type of credit is represented by credit cards. In this case, you can use your credit score to handle your loans. Your score can be boosted slightly by adding instalment loans in your credit report.
Thus, save a huge amount on all your purchases by using a personal loan. Always remember to compare different loans before borrowing any sum.

Posted in Uncategorized | Comments Off

Five Reasons for Refusal of a Personal Loan

Don’t you wish personal finance were a mandatory course in college? Unfortunately, too many of us learn by mistake. When you need a personal loan and are rejected, you might be baffled as to what went wrong- and how to fix it. Here are some clues.

NO CREDIT

No credit is a situation where you have never used credit and therefore have no credit history for the bank to review. They have no way of making an educated decision on whether or not you will pay back a personal loan based on your credit history. No credit is worse than bad credit. Qualifying for and making regular payments on these types of introductory forms of credit can overcome a “no credit” score:

· Student Loans

· Secured credit card (includes a down payment amount)

· Being added to a parent’s or spouses good credit: card, car loan, etc.

LOW CREDIT

Low credit takes on several forms. If you’re using more than 30% of your allowable debt, it can negatively impact your score. Too many inquiries from shopping around for loans will also hit you hard. Lapses in payment, defaults, or bankruptcies are giant red flags and can take a long time to rebuild from.

Other things that lenders may look at are whether or not you have sizeable assets should you default on the loan. They also check to see if your debts are diversified or if you are only carrying one type of debt.

INCOME

Proof of income is generally required when applying for a personal loan. If you are unemployed or underemployed, it can work against you in the loan approval process. Lenders may also require a work history to see how long you have been with your current employer, and to determine if you typically have job stability. Frequent job loss or change will tell a creditor that your payments may not be reliable.

PURPOSE OF THE LOAN

Believe it or not, your application can be rejected due to your proposed purpose for the loan. Financial institutions have the right to set up the parameters surrounding their disbursements and can accept or reject your application based on what you want to use the money for.

BLACKLISTING

If you’ve defaulted on debt before, your name may be put on a list of whom not to loan to,’ also known as a “Blacklist.” This will follow you around for a long time and is difficult to erase. If you do resolve the debt issues, get documents to prove the resolution.

NO CREDIT CHECK LOAN

If you need a loan now, but are concerned that you might not qualify for a personal line of credit, you can qualify for a No Credit Check Loan. You could be on your way to a better financial future in no time!

Posted in Uncategorized | Comments Off

A Latin Impact on the Finance Industry

Financial Institutions are a fantastic business model to learn from when considering ever changing market conditions. Their traditional target markets are stable, but, the needs of an emerging market, the Latino market is extremely underserved. It is certainly not for lack of money. Many Latinos have zero debt and healthy saving habits. The question arises, are financial institutions doing enough to serve this population? Are they adapting to the Latino needs? The answer is complicated.

There are two types of Latinos in the USA. One is the immigrant seeking a better life and wanting the American dream, whether they came through the proper channels or not it is irrelevant. The second, are the Latinos that are born here. These are two very different groups of people with different needs and goals. Most immigrants bring their culture, traditions, and customs with them to the US. Those born here develop a blended culture that is both Latino and American.

Financial Institutions are taking notice and making strides to accommodate this very economically influential population. The main reason is that there is a lot of investment in education and developing trust. An untold detail is that in Latino countries, people do not trust banks and financial institution because of corruption. Everything is paid in cash and there are no debt or traditional credit scores. This means that the Latino community have cash, probably stored under their mattress or in a shoe box. This is very dangerous considering that a house fire could burn an entire life savings. Another scenario is they could become a target for robbery. This is a foreign concept for Americans. What is happening is a huge learning curve, educating them on the process of building credit, saving their money in a financial institution, getting loans (mortgage, car, etc.), and most important having trust in the financial institutions.

The younger generations that are born here learn from their parents and surroundings. There is still a disconnect from the importance of financial products, building credit, and how that process works. Many of these young people are just translating for their parents, explaining financial products, and become an intermediary for conducting business. You will notice an increase in bilingual support at many financial institutions for this reason. There is still a lot of work to do in this regard, and this process will take time.

However, more and more financial institutions are offering products specific to Latinos. Information is becoming available in Spanish and more financial institutions are hiring bilingual and multi-lingual speakers. It will be interesting to see how we as a country adapt to this important demographic. It is truly an untapped market that has an important function in our economy for growth and stability.

Posted in Uncategorized | Comments Off

6 Home Loans Tips Before Applying

Applying for home loans could be dreadful, particularly on the off chance that you are a first-time home purchaser. There’s a considerable measure of printed material and indulgent preparing included. Yet at the same time, it is justified regardless of your exertion. This far reaching contract aide will walk you through the way toward securing financing for your home and make you feel that applying for a home loan is not that horrible all things considered.

1. Know about them Lender or Broker?

There are two approaches to apply for a home loan. To start with, you can manage a loan specialist or home loan organization straightforwardly. Second, you can procure a home loan representative who will help you look over an assortment of moneylenders. Most homebuyers think that its less demanding and less expensive to choose a loan specialist, without assistance from the outsider. In addition, with a specific end goal to locate an equipped and solid agent, you should do a really decent research and get references. That is the reason a great many people like to keep it straightforward and manage a bank themself. In a few circumstances, be that as it may, merchants can really work to support you. For instance, if your record of loan repayment is not all that good, an accomplished dealer might be exceptionally useful in shopping and arranging for the most ideal arrangement.

2. Know the True Rates

The publicized rate frequently snatches borrowers’ consideration yet it is really not the one that borrowers ought to depend on. The AAPR or “the genuine rate” is a much better guide, as it checks every one of the expenses and charges that will happen over the term of your loan. In spite of the fact that the AAPR is a stage up from the publicized rate, it is still only a quantitative device. Once you’ve chosen a couple loans in view of their AAPRs, you will at present need to investigate their different elements. Some worldwide think-tanks, for example, CANNEX and AIMS Home Loans can outfit you with some canny data about mortage loans and help you limit down your choices quicker.

3. Know about loans details & terms

When you search for a home loan and read through various home loan terms and conditions, you will go over money related wording that you most likely won’t discover somewhere else. It is critical for you to comprehend those home loan terms with the goal that you can secure the most ideal arrangement. Truth be told, numerous money related foundations and land firms offer free homebuying workshops, which can help you comprehend what individuals are discussing in land business. Here are some fundamental home loan terms that you ought to know:

APR – Yearly rate, expected to mirror the yearly cost of acquiring. It is otherwise called the “promoted rate” or “feature rate”, that ought to make it less demanding for borrowers to think about moneylenders and loan alternatives.

Closing Costs – Shutting costs incorporate “non-repeating shutting costs” and “prepaid things.” Non-repeating shutting expenses are any things to be paid only once as a consequence of purchasing the property or acquiring a loan. Prepaid things are things which repeat after some time, for example, property charges and mortgage holders protection. Normally a moneylender should gauge both the measure of non-repeating shutting costs and prepaid things, then issue them to the borrower inside three days of accepting a home loan application.

Collateral – An insurance is the thing that you use to secure a loan or ensure reimbursement of a loan. In a home loan, the property is the security. The borrower will lose their property if the loan is not reimbursed by assentions of the home loan.

4. Check Your Credit

When you apply for a home loan, your whole record as a consumer will be investigated by your forthcoming moneylender. FICO ratings more than 620 have a decent risk of getting affirmed for a home loan with a decent financing cost. On the off chance that your score is beneath 600, in any case, your application might be denied or you may get affirmed at a much higher loan fee. Whether you have a decent or terrible financial assessment, what you ought to do is check your credit report before your bank does. You can get your credit report from Equifax, Experian and Trans Union. In the event that there are any mistakes, attempt to contact these three organizations and clear them up. This procedure can take a great deal of time, so it is something you ought to do a while before apply for a home loan. Paying down your budgetary commitments, for example, Visa obligation and auto loans, before applying for a home loan is additionally an extraordinary thought.

5. Don’t afraid from your bad credit score

Regardless of the possibility that you have an awful financial record, you ought to in any case glance around for the best arrangement. Don’t simply expect your lone choice is a high-taken a toll loan. On the off chance that your credit issues were created by unavoidable circumstances, for example, ailment or a brief loss of pay, disclose your circumstance to the loan specialist or intermediary. Ask a few banks what you need to do keeping in mind the end goal to get the least conceivable cost.

6. Verify and clarify all the things

A pre-endorsement letter is extremely useful, yet not as awaiting as you may think. When you locate a home you’d like to purchase, and your offer has been endorsed, you will need to do a reversal to the moneylender and submit archives that confirm your monetary data to get a loan. Your benefits will be assessed. The loan specialist will investigate your work history. You ought to have no less than two years of business history in the same profession. On the off chance that you are new to the work power, advanced education may help you get endorsed. In the event that you don’t have a sufficient record as a consumer, you may utilize normal regularly scheduled installments, for example, lease, telephone, or satellite TV to demonstrate the loan specialist that you are a reliable shopper.

Posted in Uncategorized | Comments Off

The Role of Islamic Finance in Economic Stability and Social Justice

One of the most distinguishing times for the U.S. Islamic home financing industry began in February 2007. The Federal Home Loan Mortgage Corporation (Freddie Mac) sent out a press release announcing that it would no longer buy the most risky subprime mortgages and mortgage backed securities. Two months after the announcement, a leading subprime mortgage lender filed for Chapter 11 bankruptcy protection. Three months after that bankruptcy filing, nationwide financing entities warned of “difficult conditions” ahead. Manifestations of such difficult conditions appeared on the horizon of the financial market when once well-established mortgage companies suddenly began to file for Chapter 11. Similar circumstances reached the U.K. as the Bank of England cleared an authorization to provide liquidity support to Northern Rock, the country’s fifth largest mortgage lender. Five months later, Treasury of the United Kingdom became the owner of Northern Rock.

Up until that point, the gravity of these “difficult conditions” was not fully understood by most of the populace. Late in 2008, the Federal Reserve Bank of New York was authorized to lend $85 billion to the AIG. This was the beginning of the most serious recession in the United States since the Great Depression. What followed was a chain reaction that led to an unprecedented global financial crisis, as the world suffered from rising unemployment, rampant foreclosures, and severe skepticism of financial instruments.

This led to a renewed spotlight on an unfamiliar market segment that appeared comparatively more stable and, more importantly, far more ethical: the Islamic financing sector. From the financial centers in Malaysia to the Middle East, spanning across over seventy countries, Islamic finance in the U.S. increased from $5 billion in the 1980s to $1 trillion in 2010. This phenomenal growth caught the attention of global investors who were seeking to safeguard their investments through more ethical and reliable financial instruments. When financial sector workers realized that these Shariah-compliant instruments avoided many of the worst effects of the global financial crisis, it became an attractive investment vehicle to support a more diverse portfolio. The Shariah-compliant financial sector has avoided investment in predatory lending businesses and overly leveraged financial instruments due to the strict ethical nature of the Shariah governance system. News and media outlets started to cover this ancient yet unfamiliar industry in hopes of learning from the mistakes of the conventional banking sector.

The concept of the modern Islamic financial services industry is rooted in the principles of Islamic legal jurisprudence that deals with financial transactions, a branch of Islamic jurisprudence called Fiqh Al Muamalat. Fiqh Al Muamalat is a framework under Islamic Law that charts the conduct of Muslims in commercial or economic endeavors. Islamic finance products and rulings are based on specific injunctions from the Quran that prohibit certain features of financial transaction models and related economic activities.

The Quran forbids interest, also called usury or riba. The underlying reasoning is that Islam considers lending to be a charitable act to help another member of the society in his/her time of need – therefore, profiting from someone’s hardship is strictly forbidden. In the conventional banking system, when interest is charged on a loan, the risk of that transaction is transferred to the borrower while the lender gains profit from the interest-based transaction. There is no consideration for the hardships endured by the borrower in the event they undergo any loss from the transaction.

By its nature, Shariah law prohibits unethical financial practices. It also promotes wealth distribution among all people to reduce poverty and inequity. This is manifested in the prohibitions of activities such as excessive speculation, gambling, and investing in products that are harmful for society as deemed by Islamic law (alcohol, pornography, etc). The structure of Islamic financial products and services, especially its prohibition in speculative transactions, has helped the industry escape most of the adverse effects of the global financial crisis. The governance model of Islamic financial institutions has been praised as an ethical alternative by institutions such as the International Monetary Fund and the World Bank. Economic experts have suggested that Islamic financial principles can be leveraged to promote financial inclusion that uplift the quality of life in developing nations. Islamic financial principles can also contribute to financial stability and economic development around the world.

Posted in Uncategorized | Comments Off