-
Perhaps A Correction In The Definition Of Interest
Ghamidi Sahib defines interest as if someone borrows money to consume it and then the borrower has to regenerate cash to pay not only the principal but also profit (interest) on the principal.
On the other hand, if an object, such as a property, is traded and full principal plus profit is paid over several payments then profit on the object’s price is not interest.
————————-
I think, the above definition needs a little more detail as follows.
Whenever a tangible object is bought in exchange for payment of principal and profit over several payments and over a prolonged period of time then profit can’t be Interest provided that object’s resale value at any time before full payment is the same or higher than the remaining balance of the object.
This ensures that if buyer at any time is unable to pay remainig balace the seller can sell the object and recover his remining balance.
Conversely, in a similar scenario as aboven, if at any time an object’s value is less than the remining balance, then if a buyer is unable to pay reminimg balance, the object’s resale would not cover the remaining balace and the seller will come after the buyer for the remainimg balance and the buyer will have to generate cash out of thin air. Thus this is interest.
-
1 Reply
-
Perhaps A Correction In The Definition Of Interest
updated 2 months ago
2 Members
·
1
Reply
-
This is about the risk factor in trade, this is not interest. One may lose a thing one purchased with delayed payment. It does not make it fall in the category of interest. because initially and essentially it is trade. In trade, one buys things, not borrowed, no matter if the payment is made instantly or delayed.
Sponsor Ask Ghamidi
