Posted by: islamicfinancingnews | July 26, 2012

Islamic finance can include personal lines of credit

When you’re planning on using Islamic loans that avoid Riba to pay for a home purchase like a major appliance or home renovations that could take a long time to complete, one of the options you have to consider is a personal line of credit. Where a personal loan is usually based upon a lump sum payment at a fixed or variable rate of interest, a personal line of credit allows the borrower to reuse the credit on a continual basis and is best suited for homeowners that are constantly making improvements to their home or intend to make continual purchases over time.

The main advantage is that you can use the line of credit over and over again for any portion of the credit line you have been approved for, usually for a minimum amount of $5,000. The interest on the loan will be a variable rate and you’ll pay interest only on the amount of the credit you use, not on the entire amount as you would with a personal loan. Another benefit is the fact that you have access to the credit line whenever you need it. In addition, these lines of credit can be either secured or unsecured loans. In the case of a line of credit secured by your residential or business property, the interest rate is usually lower and the credit limit usually higher.

Talk to your lender about the different types of Islamic finance that suits your home ownership requirements.

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