5 ms·

> Whereby the risk of the person receiving investment is shared with the lender. Is this not already the case? > This is in contrast with a conventional loan

> Whereby the risk of the person receiving investment is shared with the lender. Is this not already the case? > This is in contrast with a conventional loan where if your property or business burns down, you still have to pay off the loan to the bank. Isn’t this what insurance is for? Interest seems like it can be both good and bad. Condemning it completely seems a bit harsh

bombcar 4y ago
Insurance doesn’t cover all possible ways for an asset to lose value, and personal recourse loans exist. Amusingly enough, California mortgages for purchase are non-usurious and compatible with this definition, because the lender can only go after the property in case of default, not the borrower.
- monlockandkey 4y ago
  The borrower is left with nothing. They pay thousands on monthly mortgage, if they are late, they are charged a penalty (more interest). If they fail to pay all together, then the property is gone. All the money the borrower dedicated to paying off the mortgage gives them nothing in return. Essentially robbery.
  - quesera 4y ago
    > All the money the borrower dedicated to paying off the mortgage gives them nothing in return. Essentially robbery. This is exaggerated to the point of nonsense. I.e. it's literally not clear whether you are hyperbolising for effect, or have no idea what you're talking about. You pay the bank for the use of the money. After 1 fully-paid year of your 30 year mortgage, you own 1.2% of the property. Or more precisely, your debt obligation is reduced by 1.2%. After 15 years, you own 32%. After 20 years, 50%. After 30 years, 100%. It's not linear, which upsets people, but it makes perfect sense if you do the math. In the mean time, if the property appreciates in value, all of that extra value belongs to you. If you stop paying the mortgage at any time, yes the bank will repossess the house to get the money you still owe them. Not all of your future payments, just the remaining debt. If the sale price is in excess of your remaining debt, they send you a check. Moral of the story: Do not mortgage short-term housing, except in rapidly increasing markets. And even/especially then, beware. Corollary: Rental property is a necessary thing, and landpeople provide an essential service. Reality: Some landthings suck.
monlockandkey 4y ago
There is risk, but it is not as risky as an investment where you sink and swim together. With a conventional loan, if your borrower sinks, they still owe you the money. Lender would have collateral to possess. There is still an outstanding amount of debt that needs to be paid. Insurance is not permitted under Islamic finance as it falls under transactions that have excessive uncertainty. There is no guarantee what the outcome is for an insurance transaction. It is like gambling, you make a bet with the insurance company such that you pay $xxx a month. If the contracted event happens (or never occurs), there is a financial winner and a loser. If in total I pay less premiums than the cost of the event, I "win". If I pay more in total for an event, I stand to make a loss and the insurance company benefits. Interest seeks to empower people who have money by making them more and more richer. It exacerbates price of essentials such that the only way to acquire is through a usurious loan. House price are in the hundreds of thousands because people have been "temporarily" handed have hundreds of thousands. If interest loans didn't exist, then houses would be at prices which people can afford through their salary.
- throwaway3838g 4y ago
  > houses would be at prices which people can afford through their salary. Isn’t this how a mortgage works? Put some money down, and allocate a portion of your monthly salary to pay the remainder. > Interest seeks to empower people who have money by making them more and more richer. The largest and most profitable companies in the world are oil/gas and technology. Wealth inequality would definitely still exist
  - monlockandkey 4y ago
    With a mortgage, you are usually paying for an asset for 20+ years because the cost of the house is really high. It is "bondage" in a sense. Without a mortgage system, at most a few years of saving to fully buy a house. I understand what you are saying when you think it is a similar thing, just the scale of numbers is different. Debt is a responsibility, and a really serious one. At all costs avoid it because there is no guarantee you will have the capabilities to pay it back + interest . If we can champion a system whereby buying assets does not involve an individual taking on a life destroying risk and instead they can use their normal income to save up in a reasonable amount of time, then this would be the best way. Yes there will always be people and entities that are richer than the rest. The aim is not to squash every class into the same income bracket, rather stop the propogation of abuse that rich companies inflict by extracting wealth from the poor. Stoping usurious interest loans means the economic interaction of rich with the poor. If they want to make money from their hoard, then they have to engage with the lower class on a level playing field (in terms of risk) with investing. In stark contrast to sitting on a throne and receiving guaranteed wealth from poor people who have no choice but to take on soul crushing debt. An endless treadmill of debt which failing to pay substantially speeds it up until an individual can not sustain themselves.

bombcar 4y ago

Insurance doesn’t cover all possible ways for an asset to lose value, and personal recourse loans exist. Amusingly enough, California mortgages for purchase are non-usurious and compatible with this definition, because the lender can only go after the property in case of default, not the borrower.

monlockandkey 4y ago
The borrower is left with nothing. They pay thousands on monthly mortgage, if they are late, they are charged a penalty (more interest). If they fail to pay all together, then the property is gone. All the money the borrower dedicated to paying off the mortgage gives them nothing in return. Essentially robbery.
- quesera 4y ago
  > All the money the borrower dedicated to paying off the mortgage gives them nothing in return. Essentially robbery. This is exaggerated to the point of nonsense. I.e. it's literally not clear whether you are hyperbolising for effect, or have no idea what you're talking about. You pay the bank for the use of the money. After 1 fully-paid year of your 30 year mortgage, you own 1.2% of the property. Or more precisely, your debt obligation is reduced by 1.2%. After 15 years, you own 32%. After 20 years, 50%. After 30 years, 100%. It's not linear, which upsets people, but it makes perfect sense if you do the math. In the mean time, if the property appreciates in value, all of that extra value belongs to you. If you stop paying the mortgage at any time, yes the bank will repossess the house to get the money you still owe them. Not all of your future payments, just the remaining debt. If the sale price is in excess of your remaining debt, they send you a check. Moral of the story: Do not mortgage short-term housing, except in rapidly increasing markets. And even/especially then, beware. Corollary: Rental property is a necessary thing, and landpeople provide an essential service. Reality: Some landthings suck.

monlockandkey 4y ago

There is risk, but it is not as risky as an investment where you sink and swim together. With a conventional loan, if your borrower sinks, they still owe you the money. Lender would have collateral to possess. There is still an outstanding amount of debt that needs to be paid. Insurance is not permitted under Islamic finance as it falls under transactions that have excessive uncertainty. There is no guarantee what the outcome is for an insurance transaction. It is like gambling, you make a bet with the insurance company such that you pay $xxx a month. If the contracted event happens (or never occurs), there is a financial winner and a loser. If in total I pay less premiums than the cost of the event, I "win". If I pay more in total for an event, I stand to make a loss and the insurance company benefits. Interest seeks to empower people who have money by making them more and more richer. It exacerbates price of essentials such that the only way to acquire is through a usurious loan. House price are in the hundreds of thousands because people have been "temporarily" handed have hundreds of thousands. If interest loans didn't exist, then houses would be at prices which people can afford through their salary.

throwaway3838g 4y ago
> houses would be at prices which people can afford through their salary. Isn’t this how a mortgage works? Put some money down, and allocate a portion of your monthly salary to pay the remainder. > Interest seeks to empower people who have money by making them more and more richer. The largest and most profitable companies in the world are oil/gas and technology. Wealth inequality would definitely still exist
- monlockandkey 4y ago
  With a mortgage, you are usually paying for an asset for 20+ years because the cost of the house is really high. It is "bondage" in a sense. Without a mortgage system, at most a few years of saving to fully buy a house. I understand what you are saying when you think it is a similar thing, just the scale of numbers is different. Debt is a responsibility, and a really serious one. At all costs avoid it because there is no guarantee you will have the capabilities to pay it back + interest . If we can champion a system whereby buying assets does not involve an individual taking on a life destroying risk and instead they can use their normal income to save up in a reasonable amount of time, then this would be the best way. Yes there will always be people and entities that are richer than the rest. The aim is not to squash every class into the same income bracket, rather stop the propogation of abuse that rich companies inflict by extracting wealth from the poor. Stoping usurious interest loans means the economic interaction of rich with the poor. If they want to make money from their hoard, then they have to engage with the lower class on a level playing field (in terms of risk) with investing. In stark contrast to sitting on a throne and receiving guaranteed wealth from poor people who have no choice but to take on soul crushing debt. An endless treadmill of debt which failing to pay substantially speeds it up until an individual can not sustain themselves.