Islamic financing has the smell of snake oil wafting from it. In Islam it states that you can't charge interest. The out come from the this so called "interest-free loan" malarkey? The University Bank is not exactly forth coming in their blurb below; but not calling it interest still doesn't change the fact that Muhammad will be paying the same as he would in a conventional loan ...but in Islamic banking, the charge is there but under another name.
Here's a fact from Fatima. "Islamic Banks do offer interest free loans but as a profit making organisation, they need to make money. So, instead of charging interest for the loan given, they charge management fees. So don't think that you are getting a better deal; it's about the same just under a different name. I know this because I was the research assistant for a doctorate thesis on Islamic Banking in Malaysia."
EG: take a $100,000 house at 6% interest over 30 years. In total it would amount to around $215,000 wither with a conventional mortgage including interest or the Islamic Bank's "management fees"...in both cases, the amount being divided into 360 monthly payments. But...and here comes the sting... it will cost Muhammad much more by going the Islamic bank financial route. Why so? Because it is set out as an "interest-free loan" from the University Bank (or any Islamic bank), Muhammad therefore will not qualify for any *IRS interest deductions! And tax relief on that $115,000 in interest paid would work out to a considerable amount of money.
So...not only would he be paying much the same on his 30 year loan as Ian the Infidel...but for the next 30 years, courtesy of Islamic Banking, each passing year Muhammad will be getting his very sensitive members struck with a very stiff stick from not being able to claim the interest back from the IRS!
*(If Muhammad lived in the UK, Inland Revenue Tax relief is on a proportion of the interest paid...he wouldn't get mortgage interest relief fully refunded).
(Photo: Copyright Control).
Here's a fact from Fatima. "Islamic Banks do offer interest free loans but as a profit making organisation, they need to make money. So, instead of charging interest for the loan given, they charge management fees. So don't think that you are getting a better deal; it's about the same just under a different name. I know this because I was the research assistant for a doctorate thesis on Islamic Banking in Malaysia."
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| Muhammad's interest-free home loan? I don't think so! |
So...not only would he be paying much the same on his 30 year loan as Ian the Infidel...but for the next 30 years, courtesy of Islamic Banking, each passing year Muhammad will be getting his very sensitive members struck with a very stiff stick from not being able to claim the interest back from the IRS!
*(If Muhammad lived in the UK, Inland Revenue Tax relief is on a proportion of the interest paid...he wouldn't get mortgage interest relief fully refunded).
(Photo: Copyright Control).
University Bank Home Financing: A community bank like University Bank will offer interest-free home financing because it is good business. Banks serving communities with a large number of Muslims are increasingly seeking to offer products like our interest-free home financing programs. Moreover, the mortgage refinance boom has ended, and new home buyers are the focus.
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