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Forums Forums Islamic Sharia Interest In Helping To Finance A Car

  • Interest In Helping To Finance A Car

    Posted by Faizan on July 30, 2021 at 8:15 pm

    As salamu alaykum,

    *** Business Model ***

    Let’s assume a car’s market value (mv) is $5000, however a buyer can’t afford to buy it on cash and request a financing option. You own a dealership & work with a bank to secure financing. The total cost of financing comes out to be $8000. Buyer is now responsible to pay $8000 (mv + interest)

    When the deal is secured, bank gives you $1500 as you helped it in the loan process and keeps $1500 for itself. (Total interest earned is $3000 & it’s split evenly between you & the bank)

    Aren’t you becoming a facilitator in a interest transaction and does it make $1500 you earn a haram income?

    Thank you

    Faizan replied 2 years, 7 months ago 3 Members · 4 Replies
  • 4 Replies
  • Interest In Helping To Finance A Car

    Faizan updated 2 years, 7 months ago 3 Members · 4 Replies
  • Umer

    Moderator July 31, 2021 at 12:51 pm

    If it’s a hire-purchase arrangement, then there is no question of interest. It would be a rent of 3,000$ charged over and above 5,000$ for the time the asset is being used till the complete payment of the principal. However, let’s say there was loan involved, in that case Bank is the one demanding interest on that loan, therefore bank is the one earning interest. The dealer however has to earn profit in his arrangements, his income is a part of that profit and he is not the primary earner of that interest. Although his earning is given to him from a pool of interest income, which a God-conscious muslim should avoid, but no explicit hurmat can be declared for his income.

    Irfan Shahzad Sahab (@Irfan76 ) can add scholarly insight into this matter.

  • Faizan

    Member August 1, 2021 at 10:22 pm

    @UmerQureshi Thank you. I’ll wait for @Irfan76 response.


    What would be the status of $1500 (earned from a pool of interest income) Please elaborate


  • Dr. Irfan Shahzad

    Scholar August 3, 2021 at 10:11 am

    car or house finance is not loan, and interest is only in loan. bank bought the car and sold it to the buyer with profit and gives you a portion of it. If it is a pure loan, bank should have no concern where you spend you money.

  • Faizan

    Member August 4, 2021 at 12:25 pm

    Thank you @Irfan76

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