Posted by: islamicfinancingnews | February 14, 2013

Choosing the right Islamic loans

kita-disyorkan-memilih-islamic-loan2 There are some fundamental differences between Islamic finance and more traditional types of western lending practices while some elements are quite similar. Choosing between a variable and fixed mortgage rate is one of the decisions you’ll need to make based on your budget concerns.

A fixed rate, as the name suggests, stays constant no matter if interest rates rise or fall, ensuring the payment amount stays the same over the entire term of the mortgage. This consistency is particularly appealing to new homeowners starting out who may have to follow a strict budget while getting used to putting aside enough money to cover all their monthly expenses and home maintenance costs.

On the other hand, a borrower with a little more financial flexibility could benefit from paying less interest as rates decline by choosing a variable or adjustable rate mortgage. Since rates fluctuate, you’ll need to keep an eye on the market and may want to lock into a fixed rate if you notice rates starting to climb.

Regardless of the method you choose, it’s good to know one of the elements specific to Islamic finance is ensuring all documents related to Islamic loans are free from any form of usury.

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