Many people have been trying to get a reliable and detailed information about the Islamic loan but haven’t. Here we will provide satisfactory explaination to guide you on how to apply for Islamic personal loan.
Understanding Islamic loans is understanding its principles and methods. See list of federal government free interest loan.
What then is this Islamic loan?
Islamic personal loan is a kind of loan provided under the principles of sharia law or the Islamic religious law stipulated in the Quran, Hadith and Sunnah.
This loan is different from other bank loans because of the differences in their terms and conditions. Islamic personal loans are available in countries where there is Islamic banking.
Contradictory to other conventional banks where customers borrow money for their business and/ personal use, the Islamic personal loan is a commodity (goods bought and sold).
In other words, the Islamic bank buys the goods needed by the customer and sell for them (with additional charges or with high price).
However, Sharia-complaint loans has many and various uses where there is an opportunity for customer to apply for wedding loan, student loan, travel loan, health care loan, SME loan, etc.
Though the name of the loan may seem confusing to some people regarding who the loan is meant for. The loan is meant for all, both Christian and Muslim. Religion is not a barrier, it is for all.
What Islamic Personal Loan Requires
Characteristically to conventional loans, Islamic personal loans also need the presentation of collateral either in form of services or properties like house and car, etc.
This is part of the criteria to be met to collect the loan. If someone is found eligible or meets the stated criteria, the bank will then make the loan available for such customer by purchasing products or services needed by the customer directly from the producer or provider and sell it again to the customer under an accord terms and conditions (profits/Interest rate) as mentioned earlier.
In addition, the bank serves as an intermediary between the producer and the customer. The banks sell the goods in their checklist of product and services to their customer – the third party broker.
The cash would be paid into the customers account so it will appear as a loan from them but the customer will later send it back to the customer.
After which the bank will use it to purchase the products or items (and services) needed by customer for him/her. However, this is done in installments with an agreed profit rate.
However, to avoid risk and other challenges associated with the price of goods and services, the bank purchases the goods and resells to the customer the same day.
Distinguishing features between assets based and unsecured personal loan
Customers have an opportunity to choose an option that functions either on the basis of lease, deferred contract or hire purchase contract.
As said earlier, the banks purchases the goods for you and resells them, whereby payment is made through installment or rental fees until the loan is completely paid.
The second phase of choice is that the bank buys the goods and sells them to you with an agreed profit rate.
The above explained concept of Islamic Personal Loan is called Murabahah and Tawarruq.
The eligibility criteria are:
- Applicants must be a minimum of 21 years old.
- Minimumsalary ranges from AED 3000 to AED 5000 (depending on the bank). It can be as high as AED 15,000.
- Duration of service ranges from one to six months.
- Theminimum age for UAE nationals is 60 years and 65 years (for expats).
- It requires transfer of salary.
How to get loan from Islamic bank
To get this loan, visit any Islamic Bank closest to you. This loan is meant for all individuals. It has nothing to do with religion.
Either you are a Christian or a Muslim, you can apply provided that you meet the criteria for eligibility.
However, the criteria for eligibility may differ from one Islamic bank to the other, but in the UAE, some Islamic banks have the same criteria.